"...because it's your money!"

 

A GUIDE TO IMPROVING COLLECTION PROCEDURES

*     Emphasize your credit policy
*     Know your customers individually
*     Keep credit profiles current
*     When necessary, tighten your calling procedure
*     Discourage extended payment terms
*     Shorten your collection schedule
*     Keep lines of communication open
*     Resolve disputed matters quickly
*     Use a reputable outside agency when in house efforts fail

EMPLOY AN OUTSIDE AGENCY WHEN:

*     The indebtedness is 90 to 120 days past due
*     Inquiry discloses customer financial reverses, falling sales or
       collection action by other creditors
*     The cost of your own efforts do not justify further time investment
*     The customer demonstrates bad faith and loses credibility

COLLECTION TIPS AND TRICKS

Better collection results provide greater revenue

  • Abandon grace periods in favor of calling customers as soon as possible once the account becomes past due.

  • Always enforce your cash discount policy strenuously. If you do not, you will almost certainly see an increase in the number of customers paying late and taking unearned discounts.

  • Always insist that applicants complete and sign your Credit Application Form, and that this form, among other things, states that the applicant acknowledges your terms of sale, your discount policy, your return policy, and the FOB point on shipments. Having a signed agreement such as this will make it easier to resolve problems that may arise during the course of your business relationship.

  • Become active in one or more industry credit groups in order to gather helpful and timely information about customers and potential customers.

  • Bear in mind that the best way to control delinquencies is before the first order ever ships.  By properly managing the new account review and approval process you will reduce the number of marginal accounts accepted, and will cut down on delinquencies and collection problems. 

  • Contact customers by telephone.  Don’t rely on dunning notices.  Written correspondence is easy to ignore, but a persistent collector calling for information about a past due balance is hard to ignore.

  • Confirm payment commitments in writing for large dollar amounts or for accounts that are seriously past due, in writing.

  • Convince customers to put their payment commitments in writing, even if it is only a short email message.

  • Competitive pressures usually necessitate selling to customers identified as marginal accounts. These accounts should be flagged so that collectors contact them quickly and follow up diligently if and when they become past due.

MORE COLLECTION TIPS AND TRICKS

  • A courteous, firm and professional collection process is something that most customers will respect - and it will be a deterrent to delinquent payments

  • After you have discussed the status of past due balances, mention invoices coming due in the next few days and ask when they will be scheduled for payment.  At the very least, you will be reminding the customer that you expect to be paid on time. 

  • After one broken payment commitment, insist that the customer send the payment to you by overnight delivery – even if you have to pay the cost.   

  • Never accept "No" from a person who does not have the authority to say "Yes". Be sure to speak with someone who can approve payments.

  • Always treat the person you are speaking to as if he or she were the President of the debtor company.  Depending on how small the company is, they might be the debtor company President.

  • Always make a second effort at resolving a past due during a collection call even if your first attempt was soundly rebuffed.  After all, you have very little to lose, and much to gain.   

  • Arrange for a lockbox study to make sure you have enough lockboxes, and to be sure they are in the proper locations to ensure faster deposit of customer payments.

  • Assign your best collector[s] to your most difficult customers – not always and not necessarily to the customers with the largest outstanding balances.

  • Be assertive in your collection efforts, but never become aggressive or [worse] hostile with the customers you call for payment.   Discourage payment delinquencies by charging late payment penalties and by enforcing them.

  • The purpose of requiring an explanation from a customer about a broken payment commitment is to make the debtor think twice before breaking another commitment to you in the future.

  • You will never be criticized for being too polite to a delinquent customer during a collection call.  

  • You will improve the chances of a customer responding to collection correspondence by including a copy of the past due invoice as well as a copy of the proof of delivery whether they asked for the proof of delivery or not.