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:
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
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.......
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:
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.
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…...
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