CHAPTER 6: COLLECTIONS
Collections work—whether performed internally or externally—can at times be an unpleasant business, especially in B2C. But following a clear, effective, and legally compliant collection policy internally, and engaging the services of the right external professionals, when necessary, can limit its inevitable unpleasantness. Once a collection agency has been hired, collections must still review the status of the accounts that were turned over for collection until the past due balances have been resolved and payment (minus fees) has been received. All collection activities by legal counsel, collection agencies, or any other parties should follow the company’s policy guidelines and adhere to all laws and professional standards because they represent your company. WRITE-OFFS If an account is deemed uncollectible following exhaustion of all of the company’s collection efforts, the amount may be written off. When this happens, the write-off is recorded in the financial records based on the value of the invoice amount considered to be uncollectible.
At times, the company will take a settlement offer for an uncollected account. The following is a list of issues to consider when looking at settlements:
Are there any guarantees pledged by the owners? Is there adequate documentation in the file to develop a settlement offer?
What is the customer’s financial condition? Is the customer in bankruptcy proceedings?
Based on information on hand, can the customer meet the settlement terms offered? What type of entity status is the customer (corporation, LLC, partnership, other)? Can the owners be held personally liable? Is the settlement offer a reasonable amount based on the balance owed?
Have all reasonable collection efforts been pursued before reaching a settlement?
Write-off of accounts considered uncollectible requires the approval of the appropriate management- level personnel, according to the organization’s write-off policy.
INCENTIVES AND REWARDS FOR AR COLLECTIONS Some companies have incentive programs that offer a little cash to employees to help get the receivables in the door faster. If your company offers such a program, it is imperative that you do not let the cash incentive alter your approach and tone with the customers. These types of incentives can actually have a negative outcome if the collector becomes too aggressive, which can lead to losing the customer to a competitor.
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THE ACCOUNTS RECEIVABLE SPECIALIST CERTIFICATION PROGRAM E-TEXTBOOK
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