Using Xero Contact Groups for Better Debtor Management and Follow-Ups

If you run an Australian business, you already know that not all clients are created equal. You have VIP clients who pay the moment an invoice hits their inbox, large corporate clients who strictly adhere to 30-day end-of-month cycles, and notorious late-payers who need constant chasing. Yet, many businesses treat all their debtors the exact same way. This is where Xero Contact Groups become a game-changer for your accounts receivable process.

What Are Xero Contact Groups?

Xero Contact Groups are a simple but powerful feature that allows you to segment your customers (and suppliers) into specific categories. Instead of scrolling through a massive list of hundreds of contacts, you can filter your clients based on behaviours, payment terms, or industry.

When used correctly for debtor management, Contact Groups allow you to tailor your invoice follow-up strategy. You can apply different communication styles to different segments, ensuring you maintain great relationships while still getting paid on time.

How to Create a Contact Group in Xero

Setting up a group is incredibly straightforward:

1. Log into Xero and go to Contacts > All Contacts.
2. Click on Options > Add Group.
3. Name your group (e.g., "VIP Clients", "Net 30 Terms", "Chronic Late Payers").
4. Save the group, then start ticking the boxes next to contacts in your list to add them to that specific group.

Top 4 Contact Groups for Debtor Management

To get the most out of this feature for accounts receivable, we recommend setting up the following segments:

1. The "VIP / High Value" Group

These are your best clients. They generate the most revenue and generally have a great relationship with you.
Strategy: You never want to send these clients a harsh, automated "OVERDUE" email on day one. If they miss a payment, it's usually an honest mistake. By grouping them, you ensure your team knows to handle their follow-ups with a polite, personal touch.

2. The "Corporate / EOM" Group

These clients are larger organisations, government departments, or agencies that run strict end-of-month (EOM) payment runs. Even if your invoice says "14 days", their accounts payable department is only going to process it on the 30th of the month.
Strategy: Grouping these clients prevents you from wasting time chasing them on the 15th of the month. You know their cycle, so you adjust your expectations and follow-ups accordingly.

3. The "Chronic Late Payers" Group

We all have them. The clients who never pay until the third reminder email or the second phone call.
Strategy: This group needs a firm hand. By segregating them, you can apply stricter credit limits, shorter payment terms, and ensure they are chased the very day their invoice goes overdue.

4. The "Direct Debit" Group

If you use GoCardless or a similar integration via Xero, put all clients on automatic direct debit in this group.
Strategy: You can exclude this group from standard invoice chasing, saving your business from sending embarrassing reminder emails for invoices that are scheduled to be pulled automatically.

Using Contact Groups to Send Statements

One of the best uses of Contact Groups in Xero is sending bulk monthly statements. Instead of sending statements to everyone (which can confuse clients who have a zero balance), you can filter by a specific group.

For example, at the end of the month, you can click on your "Chronic Late Payers" group, select all, and hit "Send Statements". This gives them a clear overview of everything they owe, making it harder for them to claim they "missed an invoice."

The Next Level: Tailored AI Follow-Ups

While Xero Contact Groups are brilliant for organising your contacts, Xero's built-in automatic reminders apply a one-size-fits-all message to everyone. This means your VIP client might receive the same robotic warning as your chronic late payer.

If you truly want to get paid without burning bridges, you need a smarter follow-up system. PaidMate connects directly to your Xero data and uses AI to craft contextual, perfectly toned payment reminders. It recognises the history of the client and tailors the message accordingly—sending a gentle nudge to a great client, and a firmer request to a habitual late payer.