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9 Tips to keep a grip on your corporation’s debtors book

How often do you hear a financial officer of any corporation exclaim in exuberant happiness how under control his debtors book is? Likely never! And the closely succeeding statement would likely be that it seems impossible to collect these outstanding amounts, the likely issue being the financial feasibility or adequate legal assistance.

From a legal standpoint, it is completely possible to keep the debtors book under control and on top of that to manage both the financial aspect and service aspect thereof, here are some pointers from a legal practitioner’s perspective, on the internal processes you can implement to keep the debtors book under control within your corporation.

1. Paperwork
The building blocks of a good summons and ultimately a successful collection, should that become necessary, is most definitely the paperwork involved. Spend the time and money at the soonest possible opportunity to draft a strong contract which protects your rights should the need arise; and to regulate the relationship in the way that you would ideally want to enact between yourself and potential clients. A proper agreement may cost you in legal fees initially, but in the long run will enable you to collect outstanding debt more successfully and speedily.

2. Document every transaction
Remember, if it’s not on paper it’s vapour – document every transaction insofar as possible, trust and business don’t necessarily go well together.

3. Debit orders
Inasmuch is possible, collect client payments by debit order and don’t rely on clients making manual EFT payments. The debit order may be put in place at the time of conclusion of the contract with your client.

4. Invoices
Your clients should receive their invoices, preferably via e-mail, by no later than the last day of the month that goods were delivered or services rendered in, the longer you wait to invoice, the longer you will wait for payment.

If possible, automate this system for both reliability and to save on manual labour.

5. Do not wait too long to react
Do not let your debtors sit idly by and wait for you to react on their nonpayment for too long. And by too long, we mean any time more than the time allowed for payment of your invoices. If your invoice is due by 7 days after receipt by your client, make sure an internal call is made within one week at the most once it has been established that payment was not received.

6. Non-paying debtors
Once you have established that you have a non-paying debtor, action must be swift. Institute a policy where collections are handed over to your attorney whilst it is still younger than 90 days. If you are able to streamline the internal processes to make that time lapse even shorter, that would be even better. The quicker matters are handed over, the greater the chances of successful recovery.

7. Credit rating
Very importantly- credit rating is very important to most individuals and corporates, ensure that your contract includes a provision that the client may be listed as a bad payer on the credit bureaus should they default on payment. Once your client is in default for the requisite amount of timeimmediately proceed to list them as bad payer- this jars most individuals and corporates into quick rectification of their non payment. The service of the credit bureau comes at a cost, but serves as a very efficient tool in collection of outstanding amounts.

8. Handover Documents
If it is apparent that handover will be necessary, great care should be taken to prepare your handover documents in such a way that your attorney can immediately proceed with collection and does not need to request any further information or documentation from your corporation, this will save not only on costs, but most importantly on time. In collection – time really is of the essence!

9. Request a list of required documents
Once you have instructed an attorney to deal with your collections, request from them a list of documents that they will require in the handover and make sure that these documents are included for each debtor handed over. You can streamline your handovers in batches of once weekly for example.

Doing a little bit of homework and ensuring that a solid debtor’s policy is in place, you will greatly minimize the stress and time lapses that generally comes with a overdue debtor’s account and thereby will reduce the amount of revenue that your corporation has to write off as bad debt.

It is never too late to implement new policy!

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