Tips to control your accounts receivable and past due issues?

[Laurie]

HAVE A DEFINED CREDIT POLICY


The first step is to clearly define when accounts are to be paid.

If customers are not informed that accounts are to be paid on time, chances are they will pay late or sometimes not at all.

Make sure that your business's terms of payment are clearly stated in writing to each customer. Include any provisions for interest, late payment penalties, collection fees, legal costs incurred should the unpaid bill not be paid under the terms of your agreement with your client/customer.





INVOICE PROMPTLY AND SEND STATEMENTS REGULARLY

If your business doesn't have a systematic invoicing and billing system, do one or get one.

Many times the customer hasn't paid simply because they haven't been billed or reminded to pay in a timely manner.

This situation frequently occurs in smaller or newer businesses where there isnt enough staff to handle invoicing and billing.



USE "ADDRESS SERVICE REQUESTED"

One of the most difficult collection problems is tracking down a customer who has "skipped" or moved without informing your business of the new address. The Postal Service has a procedure to address this situation.

Any statement or correspondence sent from a business should have the words "Address Service Requested" printed or stamped on the envelope, just below your business's return address in the top left corner.

If a statement or invoice is sent to a customer who has moved and the words "Address Service Requested" appear on your business's envelope, the Post Office will research this information.

If they can locate a change of address for that person, they will send you business Form #3547 with the correct address for a small fee. This also keeps your business's address file up to date.

CONTACT OVERDUE ACCOUNTS MORE FREQUENTLY

No law says your business can contact a customer only once a month.

The old adage "The squeaky wheel gets the grease" has a great deal of merit when it comes to collecting past due accounts.

Contacting late payers every 10-14 days will enable your staff to diplomatically remind the customer of your business's terms of payment.

USE YOUR AGING SHEET, NOT YOUR FEELINGS

Many businesses (or well-meaning people on their staff) have let an account age beyond the point of ever being collected because he or she "felt" the customer would pay eventually.

While there certainly are isolated cases of unusual situations, the truth is that if your business isn't being paid, someone else probably is.

Stick to your business's systematic plan of following up. It will become apparent who intends to really pay and who doesn't.

Appropriate action can and should be taken once you know where your business stands.

MAKE SURE YOUR STAFF IS TRAINED

Even "experienced" staff members can sometimes become jaded when dealing with past due accounts. This usually occurs when the customer has made and broken promises for payment.

Make sure the staff is firm, yet courteous when dealing with these customers. Your business's collection staff may benefit from customer service training because, in effect, they must "sell" your customer on the idea that your business expects to be paid.

Make sure that your business's collection staff is trained to not only bring the account current, but to also maintain good will.

ADMIT AND CORRECT ANY MISTAKES ON YOUR PART

Sometimes customers don't pay because they think your business has made a billing error, and if that is the case, quickly admit it and correct it.

Generally, customers realize that mistakes can happen in business. Unfortunately, some customers believe that the "owner/president" doesn't need the money.

Denying an obvious error only feeds the fire of resentment your customer may already feel.


FOLLOW THE COLLECTION LAWS IN YOUR STATE

In many states, businesses are governed by the same collection laws as are collection agencies.

Calling to collect on an account at an odd hour or disclosing to a third party that a person owes your business money are just a couple of the collection practices that can cause serious repercussions.

Contact the department of finance in for any clarification on the collection laws.

USE A THIRD PARTY EARLY

If your business has systematically pursued a past due account for 60-90 days from the due date, and it still isn't paid, the customer is sending a message.

More than likely, you or your business's staff has requested payment four to six times in the form of phone calls, letters and statements.


The time and financial resources budgeted for internal collection efforts should be focused within the first 90 days when the bulk of accounts can and should be collected.

From that point on, a third party can motivate a customer to pay in ways your business cannot, simply because the demand for payment is coming from someone other than your business.

Percentage agencies, small claims court, hiring an attorney all take from your bottom line. Search out an agency that can save your business time and money as well as being able to maintain your customer base.

REMEMBER THAT NOBODY COLLECTS EVERY ACCOUNT

Even with a carefully designed and administered collection plan, there are a few accounts that will never be collected.

Save your business time and money by identifying these accounts early on.

At the same time, your business will benefit from improved cash flow from the vast majority of accounts that do pay.

Developing and implementing a sound collections policy is a vital part of running and growing a successful business.

Follow these 10 steps and watch your business thrive while retaining a good professional relationship with your customers.