Healthy cash flow is the lifeblood of every business, regardless of its size. It ensures that creditors are paid (including employees) on time, thereby protecting the business’ valuable reputation and ensuring that profit distributions are possible.

To avoid these negative effects, having a sound debtor management strategy in place (as part of your cash flow management strategy) is vital. Moreover, prevention is better than cure, as litigation to collect outstanding monies may further strain an already distressed business.

Below are some of the most important aspects to consider when developing a cash flow/debtor management strategy for your business:

  1. Engage within clear parameters. Implement written terms and conditions of sale and / or service. Ensure that these are compliant with relevant laws.
  2. Know your client. Many businesses employ the services of consultants to check on consumer’s payment records and credit information before engaging them. The consumer should consent to this before such an investigation is embarked upon. Knowing who you are contracting with is invaluable to facilitate the risk involved and to contract appropriately.
  3. Take a deposit. Deposits like other types of property belonging to a consumer must be handled with care and kept separately. Deposit amounts should be carefully considered depending on the industry, target market and importantly, with consideration of winning and retaining the consumer’s trust. Most people are hesitant of pre-paying for expensive goods or services, especially when they have not previously engaged you.
  4. C.O.D only. Most businesses operate at least in the beginning under the premise of cash on delivery only. When these changes or is relaxed, prevailing laws must be observed.
  5. Your bookkeeper/credit controller must be proactive. In debt collection, we often refer to the” golden period” when collecting the money outside of court structures is most likely to be successful. This is ideally the first week after payment was due and generally no later than 30 days after it was due.


PocketAdvisor teaches users to identify various ways to avoid debtors and structures vital to achieving business success.  In addition, we provide all the relevant legal structures, documents and contracts needed. For more information please contact us or enrol for a program with us today!


author avatar
Nicolene Schoeman-Louw