CHAPTER 4: CREDIT MANAGEMENT
MAKE TERMS CLEAR, SPECIFY DUE DATE The invoice is the main document to initiate payment, and in a non-PO purchase it is the only document. The invoice should clearly specify when the payment must be received so as to remove the possibility of the customer deciding when the invoice is due. When does the clock start? Many savvy consumers and businesses are using float and unclear terms to extend the payment terms. The AR team should review the invoice carefully. Does the invoice have a specific field to insert the exact due date, or is it assumed that the payment is due from the date of invoice? If the due date is not specific, the buyer may use a variety of dates, such as the date on which goods/services are received or the date from a perfect three-way match. Take all assumptions out of the equation and tell the customer when the payment is due.
4.12 New Customer Acceptance Letter
Best practice companies send an acceptance letter to new customers, whether an open line of credit or other payment options are offered. The customer master file (CMF) manager or credit manager can send the letter. It should contain the following:
A statement: “Happy to do business …” Credit line Where and how to send payment (pay method) Terms and statement of expectation that payment terms be met Contact information for questions Confirmation of electronic invoice process, or billing address for paper invoices Late fees (specify how you handle late fees, if you invoice for late fees) Other policies
With the ability to add a pay method to the acceptance letter, it is possible to not turn any potential customer away, thus increasing sales and reducing risk. Example: a customer just starting out in business does not have any pay history yet and may have used most of their cash to open the business. An open line of credit may not be appropriate since the risk factor is very high. Requesting a credit-card payment for the first six months allows orders to be filled, and after six months a reevaluation can be made to determine if an open line of credit is warranted.
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THE ACCOUNTS RECEIVABLE SPECIALIST CERTIFICATION PROGRAM E-TEXTBOOK
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