A debtor is an individual, company, firm or government body that owes debt to a creditor.
In an increasingly credit-driven economy, it's important for businesses of all sizes to understand debtor language in order to make savvy decisions - whether they relate to lending money or entering into a new business agreement.
A debtor who fails to meet their financial obligations to your business will impact your cash flow. If you experience multiple debtors who are similarly lax, you could soon find yourself in serious trouble.
If in your area of business there will always be a risk of clients not settling their accounts on time, it may be wise to invest in debtors insurance. This need not only apply to major debtors becoming insolvent or a protracted default on payment, a number of smaller debtors delaying payment all has a knock-on effect to your bottom line.
In addition to taking the appropriate insurance measures to protect your business, it's essential that you carry out the credit checks before you enter into a contractual agreement with debtors or new business associates. Business Credit Express, part of industry-leader Veda (formerly Baycorp Advantage), can help by providing you with comprehensive, world-class credit reports.
Businesses of all sizes use our services to ensure the ongoing financial standing of their company.
Business Credit Express credit reports that may be applicable to your needs include:
ASIC Company Report
Our Australian Securities and Investments Commission (ASIC) Company Report (current extract) and ASIC Company Report (current & historical extract) taps into the government body's database to confirm a company's registration, shareholders and directors.
Company & Director Report
The Business Credit Express Company & Director Report product is geared towards companies with up to 20 employees and a turnover of $10 million. It includes a comprehensive risk assessment based on data from ASIC search and public record data.
All Business Credit Express reports are available to purchase online.
Payment terms are the conditions under which a seller completes a sale. These may include cash in advance, cash on delivery, or a 30 days deferred payment period.
It's important that your business has clear, established payments terms. That way, should clients dispute their overdue account, you can be confident that you have done your professional best to communicate your company's policy.
In plain terms, debtors turnover indicates the number of times average debtors are turned over in a year.
To encourage your clients to settle their accounts within the payment terms, it's essential that your business make the conditions of credit as clear as possible.
Overdue payment is a reality for most businesses. However, it's essential that your company stays on top of the issue to ensure it doesn't negatively impact your cash flow.
A well-written, polite yet firm overdue account letter can help to settle an account quickly, while at the same time creating positive associations with your brand.
Aged debtors are businesses or individuals who have failed to settle their account according to the payment terms. No business can completely avoid tardy debtors, however it's important to remain proactive in trying to resolve overdue payments to minimise its effect on your cash flow.
Sundry debtors are a group of clients most businesses have. They are either small or use you services infrequently, therefore they're not assigned their own individual ledger account.
Debtors collection must adhere to the strict standards established by the Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC) to protect the interests and rights of both businesses and individuals.
Debtor management is central to the effective cash flow of your business. Without an effective debtor control system, you leave your finances vulnerable.