Debtor Management- No Hiding Places

After almost 30 years as a credit professional there is one thing I am sure of is that you must be prepared to continuously learn new ideas. You may not ultimately use new ideas nevertheless you should strive to keep yourself aware of possible improvements that you could implement in your credit control process.

We were recently involved with a company that were finding it difficult to manage their debtors. Their business had grown by over 300% in 4 years which resulted in problems arising in lots of areas. A lot of these problems manifested on to the debtors ledger.

We implemented a debtor plan which took into account every trading account on the ledger.

The Debtor Plan incorporated a cash receipt forecast which allowed the company plan their cash flow but also it immediately highlighted instances when a debtor who had promised to pay in a certain week failed to do so. This allowed us to focus on non compliant customers who quickly got the message that payment terms must be adhered to.

The Debtor Plan allowed us to track the cash collection performance of individual sales areas and customer types. The weekly tracking of individual areas asked a lot of questions of individuals which only they could answer and ultimately it led to vast improvements in cash collection and customer compliance.

Yes there were plenty of excuses as to why payments were not made such as historic payment terms, quality issues, commercial sensitivities, contractual retentions, pricing queries and the other well known excuses. In week one the Debtor Plan established per customer account the full list of the reasons given for non payment. As the starting point for the Debtor Plan is the aged debt report we were able to calculate the exact amount of money which was not being paid and the exact reasons why. More importantly, Using the Debtor Plan we could show how much extra money could be collected by implementing an action plan. The action plan was implemented and successfully dealt with the vast majority of issues raised.

We are now taking the Debtor Plan to the next level by using it to monitor and improve the cash collection process within our clients business. Our clients can now clearly see if the process is falling down and take corrective action. The Debtor Plan is fully revised every month and the metrics are used as part of the overall cash flow KPIs .

Why not get in touch with us to discuss the options on solutions to improve your cash collection.