AL BSBFIM601 Task4.docx




AL BSBFIM601 Task4.docx


Debtor management report

• A summary: an interpretation of the information in the aged debtor report.

The client 1 will pay in 90 days.

The client 2 in 120+ days.

The client 3 in 60 days.

• Good practice debtor management

Debtors are people or businesses who owe you money. Effective management of your debtors (often referred to as credit management) will help you get paid faster and prevent bad debts. It will also help you maintain a healthy cash flow.

Credit management includes:

  • Collecting debts on time
  • setting credit limits and payment terms
  • making credit applications and credit checks
  • enforcing a clear credit policy
  • considering debtor finance.
  • Approval of Work

    We always ensure that we have the appropriate customer approval for service performed and/or product bought

    Knowledge of Debtor

    We have full knowledge about the individual or company we are giving credit to

    Terms of Engagement

    We have clear terms and conditions on our sales contracts which include expectations for customer payment.

    Our customers are aware of consequences for late or non-payment

    Invoicing and Payment

    We raise sales invoices promptly after completion of work.

    We encourage sales on the day and offer various payment options to assist this process

    We are aware and utilise cloud-based debtor management system to assist with debt collection

    Overdue Accounts

    We have a clear process to follow up outstanding or disputed debts.

    We utilise a professional, full-service debt collection firm when accounts are over 60-90 days (or earlier according to your terms) or to handle dispute resolution.

    • Develop at least 5 recommendations that could be adopted by the company in response to your analysis. This will also be based on the debtor management research you conducted.

    Have a credit policy and terms of trade in place

    Having clear terms of trade is an excellent way of minimising and preventing bad debts. Make sure you complete thorough credit history and business reference checks before you offer credit to new customers. Clearly articulate to your customers up front, in writing, your terms and the credit limits (so they know you are serious about your collection program) and ensure that they sign acceptance of your terms. It’s important that all your staff understand and follow this credit policy.


    AL BSBFIM601 Task4.docx
    Last updated: Sep 2023

    Page 1

    they sign acceptance of your terms. It’s important that all your staff understand and follow this credit policy.

    Provide the right information on quotes, invoices and statements

    If you provide the right information on your documents, and invoice promptly, you are more likely to be paid on time.

    All quotes, estimates, invoices, contracts, agreements, purchase orders, and related documents should refer to your terms of trade and credit policy. Invoices and statements should show clearly:

  • the amount owed
  • the payment due date
  • the billing addresses
  • your bank account details.
  • Include any extra details that a customer might need, such as the purchase order number, contract/account number, and details of who placed the order. If necessary, contact the customer before billing to check exactly what information they need to expedite payment.

    A good way to discourage late payment is to show details on your invoices and statements of the collection charges you may apply to overdue accounts.

    Make sure your systems are up to date and monitored

    The secret to good debtor management is well-maintained information. There are many software solutions available to help you with your credit management, and increasingly more of them are cloud-based. Good software solutions can relieve you of much of the administrative and management pain associated with debtor management.

    The best way to minimise issues is to monitor your debtor’s ledger closely – by keeping close track of the days outstanding you’ll be able to spot adverse trends and take prompt action before they start to have an impact on your cash flow.

    Implement robust accounts receivable processes

    It is very important to have a robust collections process in place, with set timescales for the various stages of communication (letters, emails and phone calls). Map out your process clearly and make sure it’s understood by all your staff. Here are some key points to consider:

    Check your delivery systems and keep signed delivery dockets so that you can prove delivery.

  • Invoice as early and as often as possible, as receiving invoices late encourages customers to delay payment.
  • Automatically send 30, 60, and 90-day reminder letters and highlight your trade terms where these are not being met.
  • Regularly follow up on all slow payers to encourage payment. Once customers know you will always make contact if payment is late, you are more likely to get priority when they schedule payments. Don’t finish a follow up call without obtaining a firm commitment to make a payment. Follow up again if it is not paid on the promised date – or better still, arrange a visit.
  • In the event of debtor disputes, insist on the payment of any undisputed amounts to maintain your cash flow while you resolve the issue. Always deal directly with your customers’ decision-makers.
  • Don’t over extend credit and avoid concentration risk

    It’s critical that you regularly review the credit limits for each of your customers. Look out for warning signs that they are experiencing financial difficulties. Regularly check for any changes in their buying habits and increasing levels…


    AL BSBFIM601 Task4.docx
    Last updated: Sep 2023

    Page 2

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