When you sell to a customer on account or on credit terms, then you agree to allow the customer to pay you in 7, 14, 30 or however many days’ time. While you’re waiting on payment, that customer becomes a debtor. We know the importance of great customer service through the buying process, but we don’t often think of debtor management as the flip side of great customer service.
Great customer service makes it easier for your clients to buy what you sell, nurtures strong customer relationships, and helps your bottom line. Great debtor management makes it easy for clients to pay what they owe, maintains good customer relationships, and helps your cash flow.
Unlike great customer service, most people in business don’t enjoy following up with customers about unpaid debts. And often, they’re not very good at it so tend to avoid it.
Debtor control is often pushed to one side, as the team attend to more urgent or enjoyable tasks. It’s done ‘in the cracks’ when a systematic approach might achieve better results. This can lock up a lot of money in debtors that could be working for your business more dynamically. The consequences for your working capital are that cashflows are hindered because of slower payments and bad debts and funds required to meet impending liabilities are tied up waiting on your debtors to pay.
Good debtor management supports healthy cash flow and that helps you drive the business further. The key ingredients? A good strategy, the right tools and having everyone in the team understand what’s needed and how important it is.
If you’d like to review your debtor management strategies and achieve a healthier cash flow, we can recommend approaches and tools that might give you better results.
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