Trading with a customer is like courtship.
Businesses are able to thrive because of credit, which is built on a basis of trust. If the bill is settled too late, it might not just be the end of the date: the relationship is over.
In this article we’ll discuss the shape of debt recovery in 2021 and how to measure the effectiveness your credit control function in these occasionally rocky liaisons.
DSO and debtor days
Days Sales Outstanding (DSO) is a reliable indicator of how long a company takes on average to recover its debts. The more debtor days you allow to accrue, the less cashflow you have in your coffers to invest – or pay your own creditors.
Improve credit control processes
Reducing your debtor days is one of the most effective ways of speeding up and growing your business. But how do you do improve your DSO?
Have your debtor days increased in 2020?
Is your credit control team always chasing for money and constantly feeling behind?
Looking at the processes you use to collect cash from your customers should be the first thing you do at the top of 2021.
If the actual work required to chase debts is costing you more time than is necessary, then it’s costing you money to chase money!
Credit control at its best is seamless, quick, and firm but polite. If any of these elements are missing, you need to enact some change.
If you haven’t automated any part of your process by this point in time, do it now. Chaser’s accounts receivable automation software does a lot of the hardest graft for you, but crucially, doesn’t take away your control of the processes.
Taking action on key debtors
Looking at delegates’ aged debtor reports for key debtors should make light reading. If you’re looking at a long list of pricey overdue invoices, totalling significant sums, you have to act.
Ask yourself and your credit control team why this might be the case.
It could be a reluctance to chase or chase aggressively enough (managing a sensitive relationship with key customers perhaps), or it could be that the physical processes aren’t working.
Are chasing communications not going out regularly enough?
Is the urgency not being broadcast clearly?
Is there just not enough time to chase debts?
These are all areas that can be addressed easily enough. The first step is to look at aged debtor reports to identify who owes you the most and, and work out a plan of action to address their outstanding payments.
Make a list of these key debtors, how much they owe, how overdue they are, and prioritise them in order from biggest debts first.
Establish an effective credit control cycle
Putting a powerful chase process into action one time only won’t solve your debt recovery problems. There needs to be an ongoing cycle of credit control to ensure you never fall behind on collections.
If customers realise that you will apply the same increasing pressure at precise intervals, their payment behaviour will adapt to meet that pressure.
What’s needed?
Automated systems like Chaser
Humans are busy and forgetful. We can only process and remember so much at once. That’s why automation is an essential for effective credit control cycles in 2021.
Software like Chaser’s can send out automatic reminders at pre-selected intervals for debt recovery. Mostly importantly, automated messaging like this is consistent, and not reliant on individual team members to send them out.
Moreover, we can set this up while maintaining a human tone, without alienating customers with auto-generated robotic reminders.
Automation should be the first thing you do this year to get on top of your credit control crises.
Debt collections rep
Effective leadership involves delegation. You can’t do everything yourself – and you shouldn’t!
Taking on a collections rep like Chaser and escalate invoices to a debt recovery service (Collections) can lighten your immediate workload and give you peace of mind that the arduous job of chasing debts is being taken care of.
Think of us as a credit control support network. We can keep an eye on tricky debtors make sure messaging is going out in a timely manner. And because we have the experience of chasing effectively, you can trust us to represent you professionally and reliably. We have your back and the debt collection fees are low compared to other services.
No time? Outsource to Chaser
It’s a simple solution to what can be a complicated problem. You need cashflow and spending all hours chasing customers is a waste of your precious time.
By outsourcing your credit control to us, you free your own time up. When one of our specialists takes over your debt recovery mechanisms, you can rest assured that you’ll be saving time and money, maintaining your great customer relationships and getting your debtors under control.
Find out more about our outsourcing and other essential credit control services to make a new start with your debt recovery for 2021.
