How to Review Debtors Accounts

Company Letterhead

{{company_name}}

{{company_address}}

Phone: {{phone}}

Email: {{email}}

Website: {{website}}

Purpose of Debtor Account Review

The purpose of regularly reviewing debtor accounts is to ensure the accuracy of financial records, identify overdue balances, assess credit risk, and implement appropriate collection strategies. This process is crucial for maintaining healthy cash flow and minimizing bad debt.

Frequency of Review

Debtor accounts shall be reviewed on a {{review_frequency}} basis (e.g., weekly, bi-weekly, monthly). A comprehensive review must be conducted {{comprehensive_review_frequency}} (e.g., quarterly, semi-annually).

Review Procedure

**1. Obtain Debtor Age Analysis Report:** Generate an age analysis report from the accounting system as at {{report_date}}. This report should categorize outstanding invoices by their age (e.g., 0-30 days, 31-60 days, 61-90 days, 90+ days).

**2. Reconcile with General Ledger:** Verify that the total debtors balance on the age analysis report reconciles with the debtors control account in the general ledger. Investigate and resolve any discrepancies immediately.

**3. Identify Overdue Accounts:** Systematically review accounts with outstanding balances beyond their agreed payment terms. Note the customer name, invoice number, due date, amount due, and days overdue.

**4. Review Payment History:** Examine the payment history of overdue accounts. Identify any recurring late payments or issues with specific customers. This may indicate a need to adjust credit terms or payment reminders.

**5. Assess Creditworthiness (for significant overdue amounts):** For customers with substantial or persistently overdue accounts, reassess their creditworthiness. This may involve checking credit references, publicly available financial information, or internal payment behavior analysis.

**6. Communicate with Debtors:** Initiate contact with overdue debtors. This can be done via email, phone call, or formal letter. Document all communication, including dates, methods, and outcomes. Refer to the 'Debtor Communication Guidelines' document for appropriate templates.

**7. Propose Collection Strategies:** Based on the review, propose appropriate collection strategies, which may include reminder emails, phone calls, payment plans, or escalation to legal action for persistent non-payers.

**8. Provision for Doubtful Debts:** Identify accounts that are unlikely to be collected. Propose a provision for doubtful debts in accordance with the company's accounting policies and IFRS/GAAP standards.

**9. Document Findings and Actions:** Maintain a detailed record of the review process, including findings, actions taken, and the current status of each overdue account. This documentation will be essential for audit purposes and future follow-up.

**10. Follow-up:** Schedule regular follow-up actions on all overdue accounts until they are resolved.

Reporting

A summary report of the debtor account review, including key findings, identified risks, and proposed actions, shall be submitted to {{responsible_manager_position}} by {{reporting_date}}.

The report should include:

- Total outstanding debtors balance

- Aged analysis summary

- List of significant overdue accounts with proposed actions

- Recommended changes to credit policies or procedures

Credit Policy Review

Based on the insights gained from the debtor account review, the company's credit policy shall be periodically reviewed and updated to mitigate future risks and optimize cash flow. This review will be conducted by {{credit_policy_reviewer}} on a {{credit_policy_review_frequency}} basis.

Signature Block

Prepared by:

_________________________

{{reviewer_name}}

{{reviewer_position}}

Date: {{review_date}}