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<p style="text-align:justify;">What is debt management? How to effectively manage debt for corporations? Read the following article to get answers to the concept of debt and practical financial management experience for companies.</p><p style="text-align:justify;">It is difficult to avoid debt when doing business. Customers owe you, and you owe suppliers. Everything is like a loop of consequences that directly affects the business's cash flow. Therefore, debt management is crucial. Without a clear policy, procedures and regulations, you will soon reach the brink of bankruptcy. Effective debt management will help you understand the company situation as well as manage cash flow more easily.</p><h2 style="text-align:justify;"><span style="font-size:19px;"><strong>1. What is debt management?</strong></span></h2><p style="text-align:justify;">What is the debt management concept? Debt management is the process of tracking and recording receivables or payables with customers and suppliers when the purchase and import transactions arise. It helps enterprises control finance effectively.</p><figure class="image"><img src="https://api.estuary.solutions/estuary-web-mediafile/file/18690256-1a00-4553-8c9e-a6d039354e6d" alt="What is debt management? How to manage debt effectively?"><figcaption><span style="font-size:13px;">What is debt management? How to manage debt effectively?</span></figcaption></figure><h2 style="text-align:justify;"><span style="font-size:19px;"><strong>2. What does debt management include?</strong></span></h2><p style="text-align:justify;">Debt management usually includes 2 main parts: administration of receivables &amp; payables of customers and suppliers. So for each of these subjects, how should enterprises manage finances effectively?</p><h3 class="indent-1" style="text-align:justify;"><span style="font-size:17px;"><strong>2.1. Customer debt management</strong></span></h3><ul><li style="text-align:justify;">Set up a clear payment policy</li><li style="text-align:justify;">Does your business accept debt purchasers?</li><li style="text-align:justify;">If yes, what conditions and requirements must the customer meet to be able to sign a debt?</li><li style="text-align:justify;">How long does this debt need to be paid?</li><li style="text-align:justify;">If the deadline is delayed, what is the plan to handle it?</li></ul><p style="text-align:justify;">Those are the basic questions to establish a clear payout policy that you must be able to answer. These will help you limit the situation that customers have money but intentionally delay debt payoff. And below are solutions for debt disputes if they arise.</p><figure class="image"><img src="https://api.estuary.solutions/estuary-web-mediafile/file/15109ab1-cbf2-4363-92b4-0512ea5225e6" alt="Always have a transparent customer debt management policy"><figcaption><span style="font-size:13px;">Always have a transparent customer debt management policy</span></figcaption></figure><h4 class="indent-2" style="text-align:justify;"><span style="font-size:17px;"><strong>Have a transparent management process</strong></span></h4><p style="text-align:justify;">Not all customers are "self-aware" of their debt to pay on time. Most businesses have to talk to them to expect to receive money. But you don't simply ask and demand whatever you want; you must have a specific process to push debt payoff while still maintain professionalism.</p><ul><li style="text-align:justify;">The process should specify who is to contact the customer?</li><li style="text-align:justify;">Who is the debt collector?</li><li style="text-align:justify;">Before going, how to remind guests?</li><li style="text-align:justify;">How long after the reminder time to go to meet customers?</li><li style="text-align:justify;">After receiving money, who should get the cash at the final step?</li><li style="text-align:justify;">If the meeting fails, how to renegotiate with the customer?</li></ul><p style="text-align:justify;">When every step in the process is written down in detail, you'll be easier to control. When problems arise (e.g. bossy debt collector's attitude), it's also quicker to find the cause and deal with it.</p><h4 class="indent-2" style="text-align:justify;"><span style="font-size:17px;"><strong>Choose the proper debt collection method</strong></span></h4><p style="text-align:justify;">The debt collection process faces many difficulties, mainly because customers refuse to pay or make excuses to postpone debt. As such, you need to prepare some backup debt collection methods for customers who are too "muddy". Here are some options you can refer to:</p><ul><li style="text-align:justify;">"Terrorise" customers by texting, calling, emailing: Every once in a while, you will "remind" about the debt. If the customer does not want to be disturbed, they must pay early.</li><li style="text-align:justify;">Contact customers' relatives: Customers may not be afraid to delay their debt payoff, but it is unlikely that their relatives will either. You can come to meet, make friends and confided in the debt that their children or siblings are missing from you. Although it is unlikely that those people will pay the debt on their behalf, the pressure may impact the customers.</li><li style="text-align:justify;">Hire a debt collection service: You should hire an outside debt collection service for large debts that are too late. They have very clever ways to push customers to pay you.</li><li style="text-align:justify;">Publicise bad debt on Facebook: This method should only be applied when customers are too "muddy", and you do not want to continue selling to them anymore because disclosing sensitive information like this will worsen the relationship between both sides.</li></ul><h4 class="indent-2" style="text-align:justify;"><span style="font-size:17px;"><strong>Choose a debt collector with persuasion skills</strong></span></h4><p style="text-align:justify;">Debt collection is inherently a sensitive issue, so the debt collector must be very skilful if you want to get money. It would help if you do not choose short-tempered, impulsive people with poor situational skills, but choose someone patient and decisive.</p><h4 class="indent-2" style="text-align:justify;"><span style="font-size:17px;"><strong>Always have a backup plan when customers delay paying the debt</strong></span></h4><p style="text-align:justify;">The more considerable debt, the higher the chance debtors refuse to pay it, with the likelihood of up to 80%. It is very typical, so you need to prepare a backup plan. The best way is to convince customers to pay in instalments so that customers will feel less overwhelmed.</p><h3 class="indent-1" style="text-align:justify;"><span style="font-size:17px;"><strong>2.2. Debt management with suppliers</strong></span></h3><h4 class="indent-2" style="text-align:justify;"><span style="font-size:17px;"><strong>Agree on payment time with suppliers</strong></span></h4><p style="text-align:justify;">When working with suppliers, you need to agree with them on the payment term. Please make it clear how long it takes from signing to receiving payment and how much to pay. The longer this period is, the better off you are, so try to negotiate well.</p><figure class="image"><img src="https://api.estuary.solutions/estuary-web-mediafile/file/e44518f8-3d75-4230-b599-0393b1930f64" alt="Clear agreement on the payment policy between your business and suppliers"><figcaption><span style="font-size:13px;">Clear agreement on the payment policy between your business and suppliers</span></figcaption></figure><h4 class="indent-2" style="text-align:justify;"><span style="font-size:17px;"><strong>Send debt confirmation sheet</strong></span></h4><p style="text-align:justify;">When the payment is near due, you should make a list of the debts and then send an email to the supplier to confirm one last time and avoid future disputes and be more proactive in terms of time.</p><h2 style="text-align:justify;"><span style="font-size:19px;"><strong>3. How to effectively manage debt?</strong></span></h2><p style="text-align:justify;">There are many ways to manage finances for a retail store, such as traditional notebooks, Excel tools and debt management software. Let's find out the advantages and disadvantages of each of these management methods to see which is right for you!</p><h3 class="indent-1" style="text-align:justify;"><span style="font-size:17px;"><strong>3.1. Management by books</strong></span></h3><p style="text-align:justify;">It is a very classic debt management method that many traditional firms are applying. When there is a debit, the business owner will record information such as date, amount, etc., in a notebook.</p><p style="text-align:justify;">The advantage of this administration style is that there is no cost. With just a pen and a notebook, you can manage the finances of the business.</p><p style="text-align:justify;">But on the contrary, the disadvantages of this debt management method are significant. You will spend a lot of time and effort taking notes, which quickly leads to confusion. Not everyone has a computerised head to be able to calculate details without errors.</p><p style="text-align:justify;">Moreover, recording on books has a very high risk of data loss. Many companies lose their financial books due to inevitable accidents such as natural disasters or fires. Then there is little chance to collect or pay the debt.</p><h3 class="indent-1" style="text-align:justify;"><span style="font-size:17px;"><strong>3.2. Manage with Excel</strong></span></h3><p style="text-align:justify;">This management style is a bit more modern. Business owners will use a simple Excel file to record and calculate debt more efficiently and accurately than recording in a notebook.</p><p style="text-align:justify;">However, this method still has many disadvantages. Because the file is saved directly on the device, you need to open it on that device for more accurate recording and management. Of course, there is a way to share the data file with others, but all edits will not be updated to that file. You will have to share the file back and forth between devices, which is time-consuming and confusing.</p><p style="text-align:justify;">In addition, similar to book management, debt management in Excel is not face a high risk of data loss. If someone unintentionally or a bad guy deletes the file, or when the device has an unexpected problem or breakdown, it also means that you have to say goodbye to the debt data.</p><h3 class="indent-1" style="text-align:justify;"><span style="font-size:17px;"><strong>3.3. Manage debt with management software</strong></span></h3><p style="text-align:justify;">It can be said to be the most advanced management method today. To achieve the highest efficiency, you must have a standard and accurate database of customers, suppliers (name, address, phone number, email, etc.) and their debts over time. Just fill in information one time for the first time; customer or supplier data will automatically show when you enter their name again.</p><p style="text-align:justify;"><a target="_blank" rel="noopener noreferrer" href="https://estuary.solutions/services/internal-working-system"><strong>Estuary Debt Management Software on mobile application</strong></a> automatically generates a debt report for each customer and supplier, making it easy to reconcile debts. All transactions are recorded in detail for each order, even each product included in one order.</p><figure class="image"><img src="https://api.estuary.solutions/estuary-web-mediafile/file/31670cb6-be98-4483-9fdf-7dfd990e8076" alt="Easily track sales &amp; debt of customers via smartphone"><figcaption><span style="font-size:13px;">Easily track sales &amp; debt of customers via smartphone</span></figcaption></figure><p style="text-align:justify;">In particular, the data on the software is synchronised to the cloud. You can access the software with many different devices such as computers, tablets or smartphones. Data are updated continuously in real-time, and you don't have to worry about data loss anymore.</p><p style="text-align:justify;"><a target="_blank" rel="noopener noreferrer" href="https://estuary.solutions/">Estuary</a> is a digital transformation company that provides a financial management platform with debt tracking &amp; reconciliation functions. It gives from overview report to detailed analysis such as the customer's liabilities, supplier's liabilities, and due date.</p><p style="text-align:justify;">&nbsp;</p><p style="text-align:center;"><a target="_blank" rel="noopener noreferrer" href="https://estuary.solutions/contact?msg=Request+Demo+Internal+Working+System&amp;service_id=3"><span style="font-size:21px;"><strong>REQUEST DEMO FOR DEBT MANAGEMENT PLATFORM NOW</strong></span></a></p><p style="text-align:justify;">&nbsp;</p>

5 Ways to manage debt effectively for business

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Debt management is the process of tracking and recording receivables or payables with customers and suppliers when the purchase and import transactions arise. It helps enterprises control finance effectively. 

What is debt management? How to effectively manage debt in business?

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