Smarten up your Debtors handling
South Pacific
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Table of Contents
Debtors Reduction ...................................................................................................................................... 3
Team effort ............................................................................................................................................. 3
General Manager ................................................................................................................................ 3
Financial Controller / Office Manager ................................................................................................ 3
Sales Manager ..................................................................................................................................... 3
9 strategies.................................................................................................................................................. 4
1. Business intelligence dashboards ....................................................................................................... 4
For management................................................................................................................................. 4
For debtors collection staff ................................................................................................................. 4
2. Customer relationship management .................................................................................................. 6
For management................................................................................................................................. 6
For debtors collection staff ................................................................................................................. 6
3. Reducing the reliance on paper .......................................................................................................... 7
4. Reducing errors ................................................................................................................................... 8
5. Making it easy to pay .......................................................................................................................... 9
6. Making follow-up a routine .............................................................................................................. 10
7. Customer checks before shipping ..................................................................................................... 12
8. Encouraging the right customer ....................................................................................................... 13
9.
Fraud Reduction ............................................................................................................................ 14
Security ............................................................................................................................................. 14
Reducing your Risk of Fraud ............................................................................................................. 15
Tools for you ............................................................................................................................................. 16
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Debtors Reduction
Debtors Reduction is generally where the business improvement process starts.
The aim is to be the “squeaky wheel” who is one of the first to be paid by having a strict routine of
overdue account follow up via clear but friendly communication. Let someone else be the “soft touch”
who doesn’t get paid when things are tight!
Are your debtor systems adequate for your business?
Team effort
A team effort is essential — initially as a review process through to implementing agreed procedures in
a co-operative manner.
General Manager
You must motivate staff as well as monitor progress towards the goals (for example, a five-day
reduction in average debtors’ days for each of the next two quarters).
Financial Controller / Office Manager
You have overall responsibility for monitoring cash flow. Your staff owns the debtors collection process
and therefore you must ensure procedures are in place to meet the goals.
Sales Manager
Your team must ensure that customers are credit worthy and their accounts will be settled when they
fall due.
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9 strategies
We will look at 9 strategies to help reduce your debtors.
Pick the easy tactics which have the biggest impact on your debtors reduction first. Then implement
others over time.
1. Business intelligence dashboards
Several dashboards can specifically help reduce your debtors.
For management
1. Any dashboard can have up to eight on-screen reports (called gadgets) with default layouts
and your defined access rights governing what is displayed.
2. Dashboards provide a top-down view of your debtors situation so you can keep an eye on the
effectiveness of your debtors management.
3. You can monitor KPIs, such as your debtor days and current ratio (current assets vs current
liabilities) against targets and previous periods.
4. You can see your actual figures (for example, debtors and major overdue customers, creditors,
stock on hand and bank balance) to help assess your liquidity.
5. The data is continuously updated so you no longer have to rely on numerous printed reports,
spread sheets, etc.
For debtors collection staff
6. The dashboards provide visual management so you can see at a glance what needs to be done
(for example, follow up invoices as they become overdue) without having to be told or run
reports.
7. You can drill down from the dashboards into your accounting data (for example, customer
invoices, payments, agreements, etc.) without having to navigate through menus or ask other
staff for help.
8. You can perform Google-like searches on part of a name, code or even a fax or phone number
for fast access to a customer masterfile.
9. You can view gadgets as lists, calendars and graphs and add totals and search boxes to suit
your needs.
10. You can filter and select data sequences, such as customers with the highest amount
outstanding.
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11. Details can be emailed or exported to Excel to pass debtors information onto a customer or
internally for further analysis.
12. Several debtors-related standard dashboards with full security are available, including:
a. Customers with overdue invoices.
b. Customers flagged as in dispute or inactive.
c. Customers exceeding their credit limit.
13. You can embed Customer Relationship Management (CRM) within a dashboard. For example:
a. Create tasks to recur daily, weekly, monthly or annually (such as collection follow-ups
or credit limit reviews). These tasks automatically appear in your To Do List.
b. See a wealth of customer information: full contact details including email addresses,
etc. for all contacts, their sales history and current balances.
c. See a customer’s contact history on one screen, including emails, tasks, quotes, orders,
invoices, credit notes, etc.
d. See a customer’s sales history on one screen, including month-by-month sales,
products recently purchased, gross profit percentage, etc.
e. Monitor quotes or orders that a customer has in the pipeline to encourage them to
pay existing invoices.
f. Create customer emails using personalised templates for professional
communications. For example, send an email to someone who repeatedly breaches
your credit terms.
g. Create bulk emails, such as a customer newsletter about new products and also
include things like changes to credit card fees, etc.
14. Two dashboards due soon will also help monitor your debtors: Cash Flow Forecaster (with
month-by-month analysis) and Financial Controller (to help reconcile control accounts).
15. Reports Designer lets you create customised gadgets and reports, such as breaking your
debtors analysis into branches, states, departments and sales reps.
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2. Customer relationship management
Customer Relationship Management (CRM) software is a “must have” for most businesses today. CRM
helps increase sales, and it can help reduce your debtors.
For management
1. CRM makes communication about the status of customer accounts much easier.
2. With all staff able to access CRM you can establish mandatory procedures for recording certain
customer payment discussions, such as:
a. Non-standard payment terms, conditions or methods.
b. All payment discussions — with whom and what was agreed, etc.
c. Any adverse customer comments about their financial position.
d. Any concerns about unethical contact, threats, etc.
3. When you talk to an overdue customer, you have all the information at your fingertips
including access to their accounting records.
4. There is no excuse for staff forgetting to look at the CRM and agreeing to ship product when an
account is overdue.
5. Managers can assign and view tasks for all or selected staff (for example, requests to do an
account reconciliation with a customer by a certain date).
For debtors collection staff
6. You have instant access to customer contact details and their history of discussions, emails,
etc. with every staff member.
7. You can record multiple customer contacts so you can escalate overdue follow-up calls if you
don’t get action at the accounts payable level.
8. You can drill down from CRM into customers’ accounting records (invoices, credit notes,
payments, etc.) without having to navigate through menus or ask other staff for help.
9. You can add notes for everyone to see, such as a promised payment date.
10. You can send personalised emails and letters to outstanding debtors (for example, a reminder
about your credit terms policy) and have these noted in their records.
11. You can add tasks and reminders, such as a To Do List for following up overdue invoices, and
view tasks for today, this week and next.
12. You can set up recurring tasks (for example, every Thursday send out copies of overdue
invoices) and highlight overdue tasks in red (for example, a payment promise).
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3. Reducing the reliance on paper
Another big reason for delayed payments is the failure to instantly handle an account question when a
customer calls. Usually this is because you have a paper-based filing system and staff cannot answer
the query even if they want to or “it’s someone else’s job”.
1. It’s time to move towards the paperless office (vs filing everything manually) so staff have
instant access to past orders, invoices, conversation notes, correspondence, etc.
2. Using drill down in enquiry screens to retrieve documents that have been filed electronically is
much faster and more efficient.
3. You can scan documents such as letters, agreements, etc. and easily access them.
4. Access rights make electronic filing more secure and documents are not left on desks, misfiled,
etc.
5. Electronic filing saves clerical time. For example, sales staff can handle most account queries
using drill down to access past orders, invoices and payment history.
6. You can use transaction enquiry to access details and ExpressLink to email them to a customer
— while talking to them on the phone.
7. You can use ExpressLink to electronically file and send reports.
The Australian Taxation Office (ATO) and New Zealand Inland Revenue Department (NZIRD) accept
electronic records provided the system is secure with controls over processing and backups. Most
records must be kept for five years (ATO) or seven years (NZIRD) and be able to be retrieved by tax
officers at any time.
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4. Reducing errors
Attaché offers features that reduce human error as a reason for deferring payment. Such errors can
also damage goodwill in seconds and reduce sales.
1. Use customer standing orders and preferred product lists to ensure you are shipping what the
customer normally orders.
2. Use alternative products (when suitable) as a substitute for out-of-stock items. This also helps
in situations where customers will not pay for incomplete orders — to complete a job, for
example.
3. Use customer special pricing to automate individual pricing structures, special date-based
offers, quantity breaks and special offers rather than relying on memory or the “black book”.
4. Use automatic order confirmations (including prices and quantities) so that when an order is
entered, a confirmation is emailed or faxed to the customer. This minimises errors such as the
wrong stock item, price, delivery location, etc. which can seriously delay payment.
5. Use global price changes to automate price updates (for example, selling and cost increases,
exchange rate movements) rather than risk manual errors and delays.
6. 6 Put a special note on the invoice to explain changes that may cause delays in approval, for
example “includes 3% price rise as advised”.
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5. Making it easy to pay
Your invoices (and statements) should clearly show all information that could possibly speed up
payment. Your more efficient customers will appreciate this and slower payers get a reminder of your
trading terms.
1. Display the due date near the invoice total.
2. Display payment methods such as bank account and BPay details.
3. Display their account ageing on invoices (and delivery dockets, if used).
4. Show ageing on invoices and statements as due and overdue rather than multiple periods so
there is no temptation to hold up a payment.
5. Have different invoice layouts for each situation, such as cash, credit, export, invoice finance,
etc.
6. Auto-generate invoices from orders and quotes to speed up processing.
7. Avoid waiting to send all invoices together at month end as this can delay the approval process
and your invoices miss a customer’s payment cycle.
8. If you don’t send statements you should. Many firms will delay payment until they receive one
and they are always a good reminder.
9. Don’t send sales flyers with statements as it reduces the impact of both and can create delays.
Send them separately, which also helps ensure they reach the right person.
10. Calculate ageing by invoice date rather than due date, if using date-based statements.
11. Use masterfile fields to categorise your customers according to their status and payment
history.
12. Use a different statement layout for slow payers emphasising the due date and special
payment incentives.
13. Send statements more frequently, particularly for regularly overdue customers.
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6. Making follow-up a routine
Customers usually pay the “squeaky wheel” first so it’s important to have a strict routine of overdue
account follow-up. The key is to maintain a consistent approach throughout your organisation, always
ensuring clear but friendly communication with customers.
1. Create a debtor’s procedure manual. Include all the relevant items from this report and have
all your staff religiously follow it.
2. Create Shortcuts menus to organise tasks into logical steps for staff to follow.
3. Each operator can select their own screen colours and font sizes and can automatically resize
windows and report preview screens to suit their personal requirements.
4. Multi-tasking lets operators have multiple tasks open at the same time for faster processing
and to handle interruptions such as a customer enquiry about an invoice.
5. Create your own company backgrounds to easily identify which company you are working in.
For example, you might have wholesale and retail companies.
6. Add links to your company backgrounds for quick access to intranet or internet sites.
7. Use customer risk analysis, based on your own criteria (such as debt to credit ratio, credit limit,
days and amount outstanding) to automatically flag as in dispute a customer with potential
credit problems.
8. Ensure all unallocated transactions are reconciled regularly.
9. Monitor the Attaché Alex exception reports for undelivered or unopened invoices and
statements. There is no point making collection calls if the customer has not seen the
documents.
10. Scan and link proof of delivery to the invoice or customer masterfile.
11. Don’t wait 30 days: follow up overdue invoices regularly, for example on the 8th, 15th or 31st
day.
12. Use due-date ranges to highlight invoices as they fall due and send a copy invoice on an
“overdue” invoice layout that has appropriate wording.
13. Create “what if?” cash flow scenarios to analyse debtors by calendar month and monitor
debtors’ trends, including by key customers.
14. When making calls use the payments due report, which shows the due date and allocated
payments, rather than the Customer Aged Trial Balance.
15. Suggest special one-off payment terms or special pricing arrangements based on direct debit
for those struggling to pay the full amount.
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16. Use Sales Rep ranges on the payments due report and send it via ExpressLink to the sales reps
for them to follow up.
17. If you pay sales bonuses, link them to invoices paid within normal terms vs gross revenue.
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7. Customer checks before shipping
The best time to collect an overdue amount and “reset the payment rules” is when customers are
placing an order or making an enquiry. Note that some of the items below can also be displayed on
your dashboards.
1. Customise your order entry screens to include things you need to check. For example, show
the account ageing so you can instantly see if the customer is overdue.
2. Flag customers that you are concerned about as in dispute to prompt caution.
3. Mark past bad payers as inactive to sound an alarm if they place another order.
4. Set credit limits by individual customer to prevent credit blowouts.
5. If you have credit insurance or invoice financing, set the credit limit to the funding amount.
6. Put passwords on credit limits so that only authorised staff can override them.
7. Display the gross profit percentage and seek faster payment terms on low margin sales.
8. Override payment terms to make the invoice due date earlier, for example indent orders
where you might have to pay an overseas supplier sooner by bank draft.
9. If delivery drivers collect payments, make sure the amount is clearly displayed on the delivery
docket or invoice and perhaps offer drivers a collection bonus.
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8. Encouraging the right customer
Encourage the right customers to your business, leaving the bad payers to others. It’s also an
opportunity to show a genuine interest in them, rather than just impose harsh credit conditions.
1. Use a pro-forma invoice for new customers where advance payment is required, rather than
an invoice that may not be paid for ages and has a GST liability.
2. Introduce new payment terms (for example, 14 days instead of the usual 30 days) if cash up
front is unrealistic.
3. If they have multiple delivery locations, record each one and confirm where invoices and
statements should be sent. Set up centralised billing where required.
4. Encourage them to run their business better by, for example, sharing your debtor reduction
ideas or, if appropriate, recommend a free review by an intelligent business systems
consultant.
5. Having customers who consistently pay on time also helps your business in other ways:
a. Improves your Profit and Loss and Balance Sheet.
b. Lowers your credit risk which improves your relationship with your bank.
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9. Fraud Reduction
Security
1. Password levels, controlled menu access and customised menus for each operator are all big
strengths of intelligent business systems.
2. Copying user rights (roles) promotes consistency when a new team member arrives in a
specific department in the business, such as sales.
3. Separating enquiry from masterfile maintenance is important both for fraud prevention and
accidents, such as typing over a customer’s name.
4. Ensure each staff member has a unique user login and password.
5. Do not permit sharing of user logins or passwords. NEVER have a log in that is the name of the
role, such as SALES, and have people share this.
6. Ensure operators change their password on a regular basis.
7. Ensure operators log out of the software when they are away from their workstations.
8. Track changes that operators are making to masterfiles and transactions.
9. Track logged in users by the time and date each logs in and out, opens or closes a company and
starts or finishes a task.
10. Tracking changes to contacts keeps an audit trail of all changes to customer and supplier
contacts, including which operator, which fields, new and old field values, dates and times.
11. Use password levels to limit operator access to different functions such as editing customer,
supplier, product and general ledger account notes.
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Reducing your Risk of Fraud
One of the biggest opportunities for fraud is when a staff member is making a sale, on some occasions
with the involvement of the customer.
1. Set a password level or hide access to the following situations so operators cannot:

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Enter transactions for a customer who is over their credit limit
Enter transactions for a customer flagged as in dispute
Print an incomplete or draft invoice and then delete it after pocketing payment
Receipt a payment during invoice entry without going through customer payments
2. Use the inbuilt calculator in numeric fields when unique calculations are made (for example, on
prices) to help prevent intentional or accidental errors.
3. Flag a new customer masterfile as inactive until approved by a manager.
4. Use open item accounts to ensure all payments and credit notes are allocated to the correct
invoice and to easily identify unpaid invoices.
5. Display on a dashboard all credit adjustment notes as they are created so managers can easily
drill down and check their validity.
6. Customise transaction entry screens so that invoice numbers, prices, discounts and delivery
addresses cannot be altered without the appropriate authority.
7. Use date checking to prevent the entry of any transactions with past and/or future dates.
8. Print the total amount outstanding on every invoice so the customer can always confirm their
balance and alert you to problems sooner.
9. Use customer special pricing to populate price and discount fields so you can ensure the
invoices are correct.
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Tools for you
On the CD that accompanies this course, you will find a number of helpful tools.
There are sample screen layouts, print layouts, and shortcuts as well.
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