Steven 50x50

Steven Renwick

31 Aug 2016

Best practice in managing your debtors

Small businesses face a challenging financial landscape. As many small businesses will know, chasing up invoice payments from your customers is a costly use of resource and can make managing your working capital difficult. Paying suppliers and meeting payroll demands can be a very real challenge. Yet still, businesses would rather improve their sales and turnover than look at their accounts receivable.

Why companies don't pay on time

Your debtors may not pay their invoices on time for various reasons including:

  • Misunderstandings: they are confused about your payment terms
  • Incorrect assumptions: they believe they have paid but haven’t
  • Disorganisation: the accounting department is unable to stay on top of their accounts payables
  • Financial difficulties: they are struggling with their own cash-flow
  • Opportunist clients (those that use you as a risk-free zero interest loan opportunity)

A proactive credit control strategy can help

On average, SMEs spend 10 hours per week chasing customers for payments. However, in working with thousands of small businesses to help them improve their financial processes, we’ve been able to pick the brains of our credit control partners, and consolidate their recommendations on how to improve your debtor management.

This best practice for managing your debtors can be summarised as follows:

  1. Send invoices a.s.a.p. once a job is complete
  2. Ensure your invoice is accurate: better to give too much detail than too little
  3. Request your clients include your invoice numbers as references for every payment they make to help you work out which invoice has actually been paid
  4. Issue invoice reminders with proper wording and sufficient information – the first should be sent before an invoice gets to its due date
  5. Use subject lines starting with ‘Remember!’: it works!
  6. Automate what you can to take the pain out of chasing most of your debtors personally – nowadays you can leverage sophisticated technology capabilities such as an accounts receivable customer relationship management (CRM) system
  7. Know your customer - effective, thorough analysis of customer credit risk data will allow you to adapt your approach accordingly

Read our full Whitepaper: Credit Control 2.0: The Ultimate Guide to getting paid faster
(including free templates, explanation of key terms, and more)

About Satago

  • The Satago all-in-one cash-flow solution is an add-on to your existing accountancy software, and means you can be equipped with effective finance solutions to cover the funding gap – PLUS a proficient credit control strategy including a cutting-edge debtor tracking system and integrated credit risk data, to help avoid the issue of late payments overall, cutting down the time chasing payments
  • Satago have a different approach to invoice finance – funding invoices from when they are raised, up until when they are due (and sometimes for even longer, up until 60 days overdue). This ensures as much value of an invoice as possible stays in the pockets of SMEs, making their cash-flow more reliable, reducing the need for reliance on funding and keeping costs to a minimum.
  • In real terms, Satago will advance up to 85% of the invoice value – for a single invoice or several - immediately transferring the amount to your bank account. The fee is usually 2-4% of the invoice value financed per 30 days. The fee is dependent on a number of factors such as your credit risk and that of your customer when we buy the invoice.