Effective debtor management pays off

Debtors are your customers. It is important to have a good relationship with them. But poorly paying customers cause stress and financial trouble. A tight credit control policy pays off. How do you manage your debtors? This article explains about calculating a collection period, debtor financing, and payment terms.

A debtor is a customer or client who has received an invoice from you, but has not yet paid. Debtors (accounts receivable) fall under assets on your balance sheet. The debtor’s counterpart is a creditor. A creditor is a company, institution, or person whose invoice you still need to pay. On your balance sheet, creditors are listed under debts: liabilities.

Debtor management

Debtor management, or credit control, is everything you do to get your clients and customers to pay their invoice as soon as possible. For the cash flow of your company, it is important to keep the item ‘debtors’ on your balance sheet as low as possible compared to your turnover. You then have more money available to pay your costs. Debtor risk is the risk of your debtor not paying their bill (on time).

Debtor management literally means managing your debtors. Good debtor management helps you to get your money (on time) and thus directly affects your cash flow. Debtor management starts before you enter into an agreement with your customer and ends when the invoice is paid.

Ensure that your clients and customers pay on time

The following tips will help you ensure that your clients and/or customers pay on time:

Legal Action

You have done everything to make sure your client or customer pays, but it has not worked. It is time to take legal action. Call in a bailiff. A bailiff will collect the debt from your client for you or will agree on a payment schedule with your client. If your client does not respond, you can start legal proceedings. The bailiff will then summon your client. The summons states where and when your client must report to the court. The judge will make a judgement (verdict) and the court bailiff will give this judgement to your client. If your client does not comply with the court ruling, the court bailiff can seize your client's income or possessions.

Apply for WHOA

The WHOA ('Wet Homologatie Onderhands Akkoord') helps entrepreneurs who are at risk of bankruptcy due to high debts, but who still have viable business activities. The purpose of the WHOA is to reorganise debts so that companies can continue to do business, or cease their activities without bankruptcy. With WHOA, a debt settlement agreement can be reached without the consent of all creditors.

As a creditor, you can petition for WHOA on behalf of your client. To do so, you will need to engage a lawyer. Your lawyer can petition the court for the appointment of a restructuring expert to prepare the WHOA request. You will have to pay the court fees and lawyer's fees yourself. The aim of a WHOA procedure is for creditors to receive more of their money back than in case of bankruptcy.

File for bankruptcy

If WHOA is not an option and your client is in such deep trouble that they cannot pay your invoice, you can file for their bankruptcy. For this, 2 creditors are needed. If your client has already been declared bankrupt, you can submit a specialised claim to the trustee. This is called 'filing for verification' ('indienen ter verificatie').

Calculate the collection period

The collection period is the average number of days it takes your debtors to pay their invoice. This is not the same as the payment term. The payment term is the term within which your customer must pay according to the agreement. The actual term within which you have the money in your account can differ from this. The average collection period is 30 to 60 days. This is how you calculate the collection period:

Total receivables (debtor amount) divided by your turnover x 365

A high debtor balance and a long average credit period debtors means that your debtors often pay late. This affects your cashflow: you have less money to pay your expenses or invest.

Debtor financing

If you have a high accounts receivable balance and a long average collection period, it means that your debtors often pay late. This affects your cash flow; you have less money to pay your expenses. In addition to the options for getting your clients or customers to pay more quickly, you can opt for debtor financing, also known as factoring.


Factoring is a form of credit for which a factoring company takes over your outstanding invoices. Some factoring companies, also known as factors, offer this for amounts as little as €1,000. The factor investigates your creditworthiness in advance. You immediately receive the outstanding amount and pay the factor a fee. The fee is a percentage of your invoice or of your turnover. The factoring company collects the invoice amount from your clients. Factoring immediately improves your liquidity. It gives you money that is immediately available for spending.

Reverse factoring

One form of factoring is reverse factoring (in Dutch). The factor then investigates the creditworthiness of your client. Your client gives a payment guarantee for invoices they approve. As soon as the factor knows for sure that the client will pay, they advance the amount to you within 5 or 10 days. Usually, the factor is the financier of your client. Reverse factoring can be interesting for large clients, such as supermarkets and energy companies, who often greatly exceed the average payment period.

Credit insurance or debtor insurance

If you take credit insurance, your insurance company will pay the amount of the invoice when your client is unable to pay. For example, if your client goes bankrupt or has a suspension of payment. Credit insurance is also called debtor insurance. Credit insurance is only applicable if you have business clients. You can choose different forms of insurance, such as insurance per transaction or per debtor. You can also insure your total turnover, which is the most comprehensive insurance. If you mainly do business with clients in a specific country, you can opt for credit insurance per country. 

Extend the limitation period for invoices

Every sent invoice has a limitation period. After the limitation period, your client is no longer obliged to pay. For consumers, the limitation period for the purchase of products is 2 years. If a consumer buys a service or a trip, the limitation period is 5 years. With business clients, the limitation period is 5 years from the end of the payment deadline. Do you send your clients a payment reminder before the end of the limitation period? From that moment, the limitation period will start over again. This is called interrupting.

Keep accounts receivable records

The retention period for your (debtor) administration is 7 years. This applies to your paper and digital records. You must keep all outstanding invoices from your clients in your accounts receivable administration. You also keep your purchase and sales invoices. The Tax and Customs Administration has listed the other information (in Dutch) you must keep records of.

Dubious debtors

Bad debts are customers who will probably never pay their invoice. You can create a provision for doubtful debtors in your administration. You transfer the invoice amount excluding VAT from the category 'ordinary debtors' to the 'doubtful debtors' category.

Reclaim non- recoverable VAT

Unless you are exempt from VAT, you state VAT on the invoice to your debtor. You declare this VAT in your turnover tax return and pay it to the Tax and Customs Administration. If it is certain that your debtor will not pay the invoice, or only partially, you can claim a refund of this VAT (in Dutch). A receivable is considered non-recoverable one year after the final payment term date has passed.