From various conversations I’ve had this past month, debtors and the high amount of debtors seems to be a common theme.

There is no one system (size) fits all solution but there must be a system that’s right for your business. If your debtors are not converting to money in the bank, you have no cash flow to pay staff, your creditors or yourself (but you already know that!)

So here are some suggestions on how you may be able to control your debtors:

1/ Put a system in place on how often you check your debtors and when

2/ Stick to number 1/

3/ If your terms state X days, contact the client via a soft general reminder on X days plus 1. It is YOUR money for services finished, so why not go after it?

4/ Are you a soloist and don’t want to dampen a relationship? Create a second email account with another pseudonym to separate yourself (work provider) from the one chasing the debt (debt collector). This also helps as there is no relationship between the client and your accounts person so less chance for haggling or re-arranging to be done. Make sure you keep through notes on when you followed up, what has been decided and follow through on those timings.

5/ Outsource debtor management to your bookkeeper or a virtual assistant

6/ Review your terms and conditions – maybe you need to reduce your terms from 14 days to 7 days?

7/ Consider offering prepayment plans to clients

8/Invoice more frequently ie leaving all billing till end of the month may cripple your cash flow if they all pay one month later.

9/ Pre-qualify your potential clients to see if they’re not already qualified as a ‘bad debtor’. Check out the newly established Creditorwatch website.

10/ If things get bad and beyond your means of control, consider seeking guidance from a debt collection agency. Do you have any more tips that you can share with respect to debtors? Would love to hear them!

Don’t end 2010 on a sour note – go get your money!