CHAPTER 6: COLLECTIONS
AP, second to AP controller, third to CFO). Letters can be sent via e-mail, fax, and regular mail. The letters are sent every 30 days (or more frequently in the later stages) and a higher-ranking manager should sign each letter. Final Demand Letter The final demand letter should be sent certified mail or express delivery. The letter should inform the customer that the company will refer the account to a collection agency (or lawyer) if full payment is not received within a specified number of days from the notice date of the letter. Across the top of the letter, write by hand: “Urgent! Past due.” A copy of the letter should go to your director of sales and the salesperson who is responsible for the account. The credit manager should be contacted and a copy of the letter provided in order for a credit hold to be activated on the account until nonpayment is resolved. COLLECTION CALLS A collection call is not always the most pleasant activity, but it is an important tool to help sustain the vital lifeblood of an organization—cash flow. Lack of a steady stream of cash collected from your customers on a timely basis can result in severe financial issues for your organization. Effective collection call processes and procedures ensure that all past-due customer accounts are properly contacted for collection of cash to sustain and increase liquidity. It is important to develop good habits and techniques for your collection call process. The tactics used will vary depending on the country’s laws and the type of organization, as well as the relationship with the customer, personal style, and the reason for the nonpayment.
Prior to making any phone calls, the collections phone log should be reviewed to read previous phone call notes. Look for patterns in promises or excuses. Did the customer meet previous commitments?
Once the call is complete, the collector should document the conversation while the details are clear. There is an old saying in collections, that if the collection call is not documented in the notes, then it didn’t happen. This documentation is also important for tracking and verifying the volume of calls. Finally, it provides critical information for the entire team. Notes should be detailed enough for you and your managers to understand the details concerning the non-payment. All attempts to collect, conversations with the customer, and promises to pay should be documented in the call log. Anyone in AR, credit, collections, and sales should have access to the call log so that everyone knows the status of a customer. Electronic routing of updates keeps department managers and sales reps aware of the status. Be prepared to follow up on any commitment dates to make sure payment is actually received.
A B2C note: When calling a consumer, there are laws that set limits on call times and language used. This will be fully covered below (6.7 Compliance).
If successive collection calls have not resulted in a conclusive action for payment, the account should be put on credit hold, and—based on the amount owed—escalated to the next level for approval to write off the account or turn it over to a collection agency. At the same time, the salesperson and appropriate management personnel should be notified of the situation so they have an opportunity to take action.
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THE ACCOUNTS RECEIVABLE SPECIALIST CERTIFICATION PROGRAM E-TEXTBOOK
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