CHAPTER 6: COLLECTIONS
6.9 Best Practice
While no one methodology or approach is applicable to every company, what follows are some common best practices in collections. These should be incorporated into policy and procedures and applied by all collectors across their accounts. This can help in cases of bankruptcy to show that this is “normal course” of business. This is sometimes referred to as a Portfolio Strategy. Devise an appropriate collections contact strategy that adequately meets the needs of your company and gets the right message to the right contact on a regular basis. When a new customer is given a line of credit, establish a collection strategy if their invoices go past due. Consider the customer’s size, account value, credit risk rating, seasonality, industry, years in business, and so on. This information should be used to create your call list and, based on the level of risk, to determine who at the account will be called and when. Implement a strategy to target these segments with specific contact methods and messages. For example, greater contact focus should be placed on those accounts that are considered “high risks” as opposed to simply prioritizing the call list by the oldest invoice. For example, a new customer who is 30 days past due would receive a call before you would call a long-term customer who has a history of generally paying on time but is occasionally late. Increase your effort on contacting the high- risk customer and you should see your payment promise rate increased, along with the amount of dollars collected. As you identify the day’s call list, don’t just call on the invoice that has been flagged, but look at the entire account and review all past due invoices and those that are about to become past due. Record conversations and promises to pay in the online system. Follow up on all promise dates to ensure that payment has been received and, if not, place another phone call until payment is received. Don’t wait for a yearly review to adjust a customer’s account. If they continue to pay slowly, it may be appropriate to lower their credit line or change their method of payment.
6.10 Conclusion
In the end, the best collections advice is old-fashioned “stick-to-it-ness.” Remember the proverbs: the squeaky wheel gets the oil; the early bird gets the worm; and out of sight, out of mind.
The bottom line: Keep calling if you want the money. Understand the legal system for disputed debts—local, national, and international laws.
Caveat Venditor — Let the vendor beware! Actively evaluate the risk of your major customers even if they are paying you well now. Beware of what can happen—and happen quickly—and take the following recommended steps:
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THE ACCOUNTS RECEIVABLE SPECIALIST CERTIFICATION PROGRAM E-TEXTBOOK
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