1] Have a Defined Credit Collection Policy One of the major causes of overdue receivables is that the business has not
defined to its commercial customers and staff when accounts are to be paid. If
commercial customers are not educated that accounts are to be paid on time, then
chances are they'll pay late or sometimes not at all. Make sure that your
company's terms of payment are clearly stated in writing to each commercial
customer.
2] Invoice Promptly and Send Statements Regularly If you don't have a systematic invoicing and billing system, get one. Many
times the commercial hasn't paid simply because they haven't been billed or
reminded to pay in a timely manner. This situation usually occurs in smaller or
newer businesses where they're short on staff to invoice and bill.
3] Use "Address Service Requested" One of the most difficult collection problems is tracking down a commercial
customer who has "skipped". All businesses should be aware of a special service
offered by the Post Office. Any statement or correspondence sent out from a
business or professional office should have the words "Address Service
Requested" printed or stamped on the envelope, just below your return address in
the top left corner. If a statement or invoice is sent to a customer who has
moved without informing you of their new address, and the words "Address Service
Requested" appear on the envelope, the Post Office will research this
information and return the envelope to you on a yellow sticker that gives the
new address or other updated information. If the customer has placed a
"forwarding order" with the Post Office, the Post Office is required to forward
the envelope to the customer and give you a form #3547 with the new address and
charge you approx. 50 cents. This will keep your address files up to date.
4] Contact Overdue Accounts More Frequently No law says you can contact a commercial 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 delinquent accounts. It's an excellent idea to contact late
payers every 10-14 days. Doing so will enable you to diplomatically remind the
commercial customer of your terms of payment.
5] 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 are a few isolated cases of unusual
situations, the truth is that if you aren't being paid, someone else is. So
stick to your systematic plan of follow up. You'll soon know who intends to
really pay and who doesn't. You can then take appropriate action once you know
where you stand.
6] Make Sure Your Staff is Properly Trained Even "experienced" staff members can sometimes become jaded when dealing
with delinquent commercial customers. This usually occurs when they have made
and broken promises for payment. Make sure the staff is firm, yet courteous when
dealing with them. Your collection staff could benefit from customer service
training because, in effect, they must "sell" your commercial customers on the
idea that you expect to be paid. Make sure that your collection staff is trained
to not only bring the account current, but to also maintain good will with them.
7] Keep Accurate And Timely Payment Records Once a new commercial customer is accepted on credit, it is vitally
important to maintain accurate and timely records on their payment history. If
you see any deviation from past payment patterns, and especially if payments
become unusually slow, immediate follow-up is warranted. This not only gives you
an early alert to impending payment problems, it also gives you the chance for
early intervention if there is an outside influence.
8] Follow the Collection Laws in Your State In many states, businesses are governed by the same collection laws as are
collection agencies. For example, calling customers at an odd hour or disclosing
to a third party that they owe you money are just a couple of the numerous
collection practices that can cause serious repercussions. If you're not sure,
call your state's department of finance which governs and monitors collection
agencies. Click Here for a summary of the Fair Debt Collection Practices Act.
9] Use a Third Party Sooner If you've systematically pursued your delinquent commercial accounts for 60
to 90 days from the due date, (and they still haven't paid) you're being
delivered a message by your client. More than likely, you've requested payment
four to six times in the form of phone calls, letters and statements. Statistics
show that after 90 days, the effect of in-house collection efforts wears off
80%". That means that the time and financial resources budgeted for commercial
collection efforts should be focused within the first 90 days where the bulk of
your commercial accounts can and should be collected. From that point on, a
third party can motivate a commercial customer to pay in ways you cannot, simply
because the demand for payment is coming from someone other than you. Before
paying a percentage to a commercial collection agency, or using small claims
court or an attorney, check into using a fixed flat fee collection service.
10] Admit And Correct Any Mistakes On Your Part Sometimes your commercial customers do not pay because they feel you have
made a mistake. Unfortunately, many commercial customers believe that "the
owner/president doesn't need the money". Denying an obvious error only fans the
fire of resentment your customer may already feel. If the basis of the
non-payment is a dispute over the quality of your product or service, a mutually
agreeable settlement between you and the customer should be arrived at promptly.
The commercial customer may use a minor dispute to withhold substantial payment.
Insist that the undisputed portion get paid immediately, indicating the balance
will be negotiated. This will not only help to collect payment payment, it shows
the commercial customer that you are listening to his or her concerns.
11] Remember that Nobody Collects Every Account Even by setting up and adhering to a specific commercial collection plan,
there are a few commercial accounts that will never be collected. By identifying
these accounts early, you will save yourself and your company a great deal of
time and money. Even though a few may slip by, you'll find that overall the
number of slow pay and nonpaying commercial accounts will greatly diminish, and
that's a victory in itself!
The information compiled on this site is
Copyright 1999-2008 by Attard Communications, Inc. and by the individual authors.
Business Know-How is a woman-owned business and a registered trademark of Attard Communications, Inc.
Phone: 631-467-8883.
