SME Debtors’ System Manual

SME Debtors’ System Manual gives accounting firms a comprehensive set of resources for helping SME clients establish a written, consistent and accountable debtors-management system.

The package includes 23 practical resources centred around a customisable SME Debtors’ System Manual. Supporting material covers customer-account applications, credit assessment, customer due diligence, Terms of Trade and PPSR considerations, debtor monitoring, Debtors’ Days Outstanding, debt recovery, staff training and periodic review of the client’s overall system.

The key opportunity for your firm is not simply helping a client collect overdue accounts. The resources allow you to work with management to establish better debtor procedures before credit is granted, help the client implement those procedures across the business and then periodically review whether the system is producing the desired improvement in cashflow.

A Customisable SME Debtors’ System Manual

The central resource is the SME Debtors’ System Manual, supported by a dedicated Procedure Control Form.

The manual can be adapted to suit the individual client’s business, trading arrangements, customer base and internal responsibilities.

This allows your firm to provide the client with a written debtor-management system rather than a generic collection checklist.

The customised manual can provide a common reference point for:

• Business owners and managers
• Accounts and administration personnel
• Sales team members
• Other employees involved in approving customers or managing accounts

Start Debtors Management Before the Invoice Is Overdue

A major theme of the package is that effective debtors management begins before a credit sale is made.

The resources help your firm discuss the procedures the client should have around areas such as:

• Opening customer accounts
• Assessing prospective credit customers
• Trade references
• Credit limits
• Trading terms
• Customer approval
• Internal communication
• Ongoing monitoring of customer accounts

This can help clients move away from informal credit decisions and create a more deliberate approach to managing customer exposure.

Debtors System Checklist

A dedicated Debtors System Checklist helps your firm review the major components of the client’s existing debtor-management procedures.

The checklist provides a practical starting point for identifying:

• Procedures already operating effectively
• Missing documentation
• Areas where responsibilities are unclear
• Weaknesses in customer approval and monitoring
• Collection processes requiring improvement

It can also be used when the system is reviewed again in the future.

Application to Open an Account

The package includes an Application to Open an Account resource for businesses that provide trade credit to customers.

This helps management establish a more consistent process for obtaining customer information before deciding whether credit should be offered.

Customer Application Due Diligence

A dedicated Customer Application Due Diligence Checklist provides further support for reviewing prospective credit customers.

This can help your firm encourage clients to make credit decisions based on appropriate information rather than relying solely on the expectations of sales personnel or an informal request from the customer.

Credit Limits and Trading Terms

The resources support a more structured approach to establishing and communicating:

• Approved customer credit
• Trading conditions
• Payment expectations
• Internal customer-account controls

This creates clearer boundaries for both the customer and the client’s team.

Directors’ Personal Guarantee and Indemnity Resource

A sample Directors’ Personal Guarantee and Indemnity resource is included for situations where additional protection may be considered when providing credit to a private company.

This is a legal area, and the resource should be used as a discussion and referral tool rather than as a substitute for appropriately drafted legal documentation.

Clients should obtain current legal advice before adopting or relying on guarantee documentation.

Declining Unsuitable Credit Applications

The package includes a Letter Declining Credit Application, providing a professional way for clients to communicate where they decide not to extend trade credit.

This reinforces an important principle of debtor management: businesses are not obliged to provide credit to every prospective customer.

New Customer Communication

Resources are included for welcoming approved customers and communicating relevant customer-account information within the client’s organisation.

This can help ensure that sales, administration and accounts personnel understand the approved trading arrangements from the beginning of the relationship.

Terms of Trade, Retention of Title and PPSR

The package includes material relating to:

• Terms of Trade
• Retention of Title
• Personal Property Securities Act considerations
• Personal Property Securities Register considerations

These resources help the accountant identify where the client’s debtor-management system intersects with legal trading documentation and security interests.

Because these areas can have significant legal consequences, Terms of Trade, Retention of Title provisions and PPSR arrangements should be reviewed with an appropriately qualified legal adviser where necessary.

Maintain Control After the Customer Is Approved

Good customer due diligence at the beginning of the relationship does not remove the need for ongoing account control.

The SME Debtors’ System Manual supports the development of procedures around:

• Customer account status
• Credit limits
• Invoicing
• Statements
• Disputed accounts
• Overdue balances
• Ongoing credit decisions

This helps make debtor management part of the client’s day-to-day operating system rather than something considered only when cashflow becomes difficult.

Aged Debtors Analysis

The manual incorporates regular review of the client’s aged-debtors position.

This gives management a clearer view of:

• Accounts moving outside normal trading terms
• Customers requiring attention
• Concentration of overdue balances
• Changes in debtor performance over time

Debtors’ Days Outstanding Calculator

A dedicated Debtors’ Days Outstanding Calculator is included to help measure how effectively the client is converting credit sales into cash.

The calculator can be used to compare the client’s current debtor position with a targeted outcome and help quantify the potential cashflow improvement available from reducing the amount tied up in receivables.

This turns debtor improvement into a measurable financial objective that your firm can review with the client over time.

Debtors Reduction Checklist

The Debtors Reduction Checklist helps convert debtor analysis into practical collection priorities.

It can be used to identify accounts requiring particular attention and support a more coordinated approach between management, accounts personnel and other team members who have relationships with those customers.

A Structured Debt-Recovery Process

The package provides resources for establishing a consistent process for following up overdue accounts rather than allowing collection activity to depend on who happens to be managing the ledger.

This gives the client a clearer progression from routine account monitoring through to stronger recovery action when required.

Five Progressive Debt-Recovery Letters

The package includes a series of five progressive debt-recovery letters.

These provide the client with a structured correspondence sequence that can form part of its wider collection procedures.

The wording and timing of debt-recovery correspondence should always be reviewed against current legislation, the client’s Terms of Trade and the circumstances of the individual debt.

Document Customer Follow-Up

The debtor-management system also encourages clear records of collection activity and customer commitments.

This can help improve continuity where several members of the client’s team may become involved in following up an account.

Know When Further Credit Should Be Reviewed

The resources help management consider whether customers with deteriorating payment behaviour should continue to receive the same level of credit.

This provides a framework for reviewing customer exposure before an overdue balance becomes substantially larger.

Online Collection and Monitoring Guidance

Material is included on the use of online or automated debtor-management tools.

This can help your firm discuss how technology may support more consistent account monitoring and customer follow-up.

Technology providers and available services change over time, so current options should be evaluated for the individual client.

Escalation and External Recovery

The package includes background material relating to external recovery options where the client’s internal collection procedures have not produced a result.

This can help management recognise when a matter may need to progress to an external collection service, tribunal, court or legal adviser.

Recovery procedures, jurisdictional limits and legal requirements vary and can change, so current advice should be obtained before formal recovery action is commenced.

Debtors System Staff Training

A dedicated Debtors System Staff Training resource helps the client communicate the written debtor-management procedures to the employees responsible for implementing them.

This is particularly valuable because debtor performance can involve several parts of the business, including:

• Sales
• Administration
• Accounts
• Management

Your firm can therefore provide more than the written manual — you can help the client ensure that the people responsible for the system understand their roles.

Connect Debtors Management with Cashflow

The manual also introduces wider Cashflow Management considerations.

This allows the adviser to connect debtor performance with other areas affecting working capital, such as:

• Cashflow forecasting
• Stock
• Work in Progress
• Creditors
• Capital expenditure
• Finance requirements

This can provide a natural pathway from implementation of the debtor system into a broader cashflow-management engagement.

Debtor Finance and Factoring

Supporting material introduces debtor-finance options such as discounting and factoring.

This can help your firm identify situations where the client may benefit from investigating alternative working-capital finance while still recognising that financing does not replace the need for sound debtor procedures.

Current finance products, providers, fees and eligibility requirements should be investigated for the individual client.

Debtor and Credit Insurance

The package also introduces debtor or credit insurance as a potential risk-management consideration for businesses with significant exposure to customer non-payment.

This gives the adviser another issue to explore where concentration of customer-credit risk is material to the business.

Conduct Periodic Debtors’ System Reviews

One of the strongest advisory opportunities within the package is the ability to conduct a periodic Debtors’ System Review.

Your firm can return to the client and assess whether:

• The written procedures are still appropriate
• The agreed controls are being followed
• Staff understand their responsibilities
• Debtor performance is improving
• Customer or trading conditions have changed
• New procedures or documentation are required

This turns the SME Debtors’ System Manual from a once-only document into an ongoing management system.

Update the Manual as the Business Changes

Customer profiles, payment methods, accounting systems, staff responsibilities and trading arrangements can all change over time.

The customisable format allows the client’s written debtor procedures to be reviewed and updated as the business evolves.

Supporting Presentation Material

A supporting SME Debtors’ System Manual presentation is included for adviser familiarisation and appropriate client or team discussions.

The wider product resources can therefore support both implementation of the written system and education of the people responsible for operating it.

Legal and Regulatory Considerations

Several areas within debtor management can involve legal rights and obligations, including:

• Guarantees
• Terms of Trade
• Retention of Title
• PPSR
• Debt-recovery correspondence
• External recovery

The resources help identify these issues but should not replace current legal advice where legal documentation, interpretation or enforcement is required.

A Repeatable Debtors Management Advisory Service

Together, the 23 SME Debtors’ System Manual resources give your firm a practical framework for helping clients create, implement and maintain a professional debtor-management system.

Your firm can help the client improve the way credit is granted, establish clearer internal responsibilities, measure debtor performance, strengthen collection processes and periodically review whether the system continues to operate effectively.

This creates a much stronger advisory proposition than simply becoming involved after overdue accounts have already placed pressure on cashflow — and provides a natural pathway into ongoing cashflow, working-capital and financial-management services.