Debtor management: more return on your working capital

Accounts Receivable Management

What is receivables management? The phrase explains it all: the management of your debtors. It is the process of getting your outstanding invoices paid on time. There is always a debtor risk: the chance that your debtor will not pay on time or at all. A good accounts receivable manager reduces these risks and ensures that your invoices are paid faster so that you maintain a steady cash flow. The process starts even before you enter into an agreement with your customer. Timely, thorough, and consistent action is crucial, as is using the proper accounts receivable management software. In this article, you can read more about debtor management software.

It is not uncommon for accounts receivable management to be treated as a side task while this process stands or falls with the consistent performance of several tasks. Outsourcing accounts receivable management ensures that there is never a question of ‘not having enough time’ and guarantees that the process continues during vacations and illness. And to make things even easier for you, your data can be processed securely from any accounting software package. Are you considering outsourcing your debtor management? Then please read this article.

How do you optimize your accounts receivable management?

Optimizing your debtor management stands or falls with the right people and tools. What does that mean for you, and what can we do for you? We take care of the following for you:

  • Analysis of your debtor portfolio and the current processes and tools
  • Inventory of your wishes and needs concerning how to approach your customers
  • Structuring of the whole process of debtor management
  • Implementation of the agreed structure
  • Execution of the agreed credit management process
  • Periodic reporting and discussion of the accounts receivable portfolio
  • Periodic evaluation

Process of debtor management explained

The ideal customer pays your invoice neatly within the payment term; unfortunately, things often work slightly differently in reality. That’s why it’s essential to have a debtor manager who monitors this process closely and consistently.

What if your customer has not paid on time?

  • Check from your side whether everything is in order: Has the invoice been sent? Check if a customer complaint has been filed. Is there any other reason why your invoice has not been paid yet? If so, resolve this first.
  • Don't wait too long to send a payment reminder. If you wait too long, this could mean that your customer will take it easy the next time they pay. Preferably send a reminder within several days after failing to pay (maximum 10 days).

Points of attention for a payment reminder:

  1. Be friendly and straightforward and keep it short. Do not use threatening language (this can seriously damage your relationship with your customer).
  2. Call it “Payment Reminder” (adding “first” insinuates that a “second” will follow and may cause the customer to wait a little longer to pay).
  3. Name the invoice and debtor number. Enclose a copy of the invoice.
  4. Expressly state what you require from your debtor: payment of amount X in €, to your account number (written in full), on date X or within a certain number of days (maximum 7) after your reminder has been received.
  • If your customer still hasn't paid after the deadline you specified in the payment reminder, it's time to send a formal notice. In a dunning letter (or e-mail), you explicitly encourage your customer to pay the outstanding invoice (now you set a shorter payment period, maximum seven days).

Legally speaking, it is not compulsory to send a formal notice, but this is usually done. If you have sent a notice of default, the claim can already be handed over to a debt collection agency once the invoice deadline has passed.

  • Has your customer still not paid? Then put your customer in default. Sending a notice of default is mandatory in business terms before you can hand it over to a debt collection agency.

Points of attention for a formal notice of default:

Make sure your notice of default meets the points listed below. This is evidence for a court to formally determine that negligence has occurred.

  1. Should always be in writing.
  2. Name the invoice and debtor number. Attach a copy of the invoice.
  3. Specifically state what you demand from your debtor: payment on date X or within a period of 5-7 days) after your formal notice has been received by your debtor, state the amount X in €, into your account number (write in full).
  4. Include that statutory interest and extrajudicial collection costs will be charged.
  5. Optionally, you may include initiating legal proceedings if your customer does not pay.

Finally: keep all correspondence safe. In the unlikely event of a lawsuit, the documents will serve as evidence.

The added value of Xolv

Debtor management means relationship management. Good relationship management means communicating honestly and with personal attention, and that is what we are all about. As an extension of your organization, we tactfully contact your clients on your behalf.

Read more about debtor management here

Good credit management stands or falls with the right tone

Good debtor management: the cheapest way to achieve optimum cash flow

What results can you expect?

  • Your customer satisfaction will increase through the early identification and resolution of complaints. A complaint is an opportunity, but a complaint that is not identified on time or not resolved to satisfaction leads to non-payment of your invoices.
  • Due to the structure and follow-up, there is continuity. Even in case of illness, vacation, or other priorities, debtor management by Xolv will always continue.
  • It is cheaper than doing it yourself or having an employee do it as a subtask. No salary or office costs
  • Debtor management is our business, and you can focus 100% on your core activities.
  • Increase in working capital and reduction of financing costs

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