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Posted: 14 April 2016

Debtors Management - Vital for Business Success

Issue 0041

On the ESS Small Business’ website, we have a wide array of information (some free, some available for purchase) relating to debtors’ management.

The free material includes the debtors’ overview, looking at the various aspects of the management of debtors and suggestions on how to collect debts (Debtors’ Collection).

We also have a subscription service available, whereby you can subscribe for an SME Debtors’ Manual that you can review, edit as you require and then customise as yours so that you have a manual in your business to guide the persons who have the responsibility for debtors and covers items such as:

  • approving an account
  • PPSR function
  • collection of debtors
  • calculation of debtors’ days outstanding
  • sending of statements to your customers

The manual also looks at some of the due diligence services combined with debtors’ management.

The SME Debtors’ Manual includes introduction on an effective debtors’ system, debtors’ management system and setting up for a debtor.

Setting up for a debtor is the initial application for a debtor to be able to open an account. At that stage, they’re not a debtor, they’re a prospective customer who has asked if they can purchase on a credit basis. How do you go about checking the bona fides of that would-be long-term customer?

Once the new customer has been approved, the next task is the drafting of the welcome letter to the new customer, which allows you to identify your terms of trade and the credit limit that the customer has been granted.

Evaluation of the PPSR issues is very important. Over $120M has been lost by Australian businesses in court cases since the PPSA commenced 4 years ago. The Debtors’ System Manual discusses the Terms of Trade and Retention of Title Agreements, both of which should be prepared by your commercial solicitor. There needs to be a discussion on whether you’re going to register a particular customer. Just bear in mind that you don’t need to register each invoice on the PPSR, you just need to register a customer. The registration lasts for a maximum of 7 years.

Debtors Management - Vital for Business Success

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