February 15, 2023
7 tips for good accounts receivable management
Many entrepreneurs lose a lot of money every year because they do not keep track of whether their sent sales invoices are actually paid by the customers. It is ofcourse a great shame if you work very hard to provide the best services or the most beautiful products, but then earn nothing. You certainly don't want to lose money. Therefore, good credit management is very important. In this article we explain to you how you can take care of good credit management so you will not leave any money lying around in the future.
What exactly is credit management?
First of all, you need to know what credit management is. Very simply put, debtor management is managing your debtors. This means that everything you do to ensure that your customers pay your invoices belongs to debtor management. This can include, for example, preparing clear invoices.
Tips for good credit management
1. Schedule time to work on your debtor management and consider this a regular task.
It is important to keep track of who has already paid and who has not yet paid. Often entrepreneurs are busy and push this into the background, but that is not the intention.
2. Get to know your customers really well, know who you are doing business with.
You really only want customers who you know will pay and don't have credit problems. Therefore, it is important to do research on your (potential) customers. For example, you can just google your customer or ask in your own network if there are already people who have done business with this customer. You can also, for example, do a credit check or do a check in the trade register of the Chamber of Commerce.
3. Make clear agreements about payment terms and delivery terms.
It is important to record these agreements; a phone call alone is not enough. With clear agreements you avoid hassle afterwards. When selling goods, it can also be useful to record in these agreements that the customer is not the owner of the goods until he or she has paid.
4. Draw up clear invoices and send them as soon as possible.
It is especially important that the payment term/due date and total amount are clearly stated on your invoice. It is also useful to state which goods or services the invoice relates to. That way the customer knows exactly what it is about. When you send invoices late, there is a greater chance that your customer will not pay or will pay later. Therefore, you should try to send an invoice as soon as possible.
5. Establish a clear dunning process for yourself.
A dunning process involves creating a process for when customers don't pay. A dunning process is important because it gives you structure and keeps you on top of your money, so to speak. We'll give you an example of a dunning process:
When your customer hasn't paid after the payment deadline has passed, you send a friendly reminder of the outstanding invoice via email. You obviously want a good relationship with the customer so it's not convenient to send an angry reminder right away. If the customer has not paid after 7 days, you can call the customer to make a new appointment when he/she will pay. If you still don't receive anything after that, you could send a formal reminder by mail and postal mail. This is also called a summons letter. This is a kind of final warning to the customer. Your customer then has 14 days to pay. After these 14 days, you can hand over the debt and hire a collection agency.
6. Give customers a discount if they pay quickly.
You could give customers a small discount if they pay within 3 days, for example, while your payment term is 14 days. In this case, customers will probably pay faster and you will also have fewer defaulters. This in turn saves you time in your accounts receivable management. It's also nice to have your money in your account as soon as possible so you can cover (unexpected) expenses more easily.
7. Purchase credit insurance.
When you have many defaulters, it can sometimes be useful to purchase credit insurance. This covers the risks of customers who don't want to pay.
So accounts receivable management is everything you do to make sure customers pay. Of course, you don't want to lose money, which is why good accounts receivable management is super important. Hopefully you can get started soon with these 7 tips!