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"Debtor Assessment Template"

This Debtor Assessment template will help you to assess your debtors and to see which ones pose the biggest financial risk. It also enables to quickly identify any products or services for which you may wish to adjust your terms of sale.

Getting paid for the services or products you provide as a business is vital to both short-term cash flow and long-term growth. Many businesses have been critically harmed by simply not staying current on the accounts receivables and failing to collect enough of the money that was owed to them. Extending lines of credit is a good way to build a loyal customer base, but it can also be taken advantage of when placed in the wrong hands. It is crucial that you as a manager understand just how important collecting all payments really is to the operation of the business as a whole.

To start reviewing your customer list and making sure that credit is not being given out in too risky a fashion, create a report that shows the average time it takes each customer to pay. Right off the bat, you should have a majority of your customers that you can consider 'reliable' and cross them off of your review list. Any customers that have a long average time to pay should be included on the list that you are going to review when deciding if a change in terms is necessary.

With your list to review in hand, start going over each customer on a case by case basis. You will need to be looking at your accounting software during this review to see what the patterns are in the payments that you receive.

As a manager, you will usually be expected to understand basic accounting concepts and communicate effectively with financial people in your own organization. You may also be asked to contribute financial data about your own business unit. The basic principles of accounting are best understood by considering some simple businesses and how they might document their financial activities.

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