Despite signs that the recession has bottomed, stay tough about debt collection. Don’t jump to the conclusion that your customers may just pay their bills a little faster. Your customers are going to be even more strapped for cash as they think about increasing stock and adding workers. Therefore, you musts be even more aggressive about collection management.
Key steps:
Pick up the phone more readily when a bill is overdue. Instead of waiting until an invoice is 45 days old, start the process after the 40th day. At first, be cordial. Inquire whether the customer is satisfied or if there’s a cause for the delay. On subsequent calls, however, become increasingly tough, depending on the value of the customer.
Run an aged account receivable record weekly or semi-monthly rather than only monthly. It will spot the laggard bill payers much more quickly. The older a receivable gets, the less likely it is to be paid at all. That’s why it’s important to be at the front of the line when the bills are paid. Most companies pay bills about mid-month. So don’t wait until after they’ve dispensed all their allocated cash to make a phone call about an overdue bill. Time the call for the second week of the month if possible.
Charge interest on overdue bills. Take a cue from the notices, which appear on consumer credit card statements. On the monthly invoice, state an interest penalty for bills not paid within 30 days. While the likelihood of actually collecting the interest penalty may be small, the inclusion of the charge on follow-up invoices is a useful message of how serious the company is about collecting its due.
Analyse which types of customers are likely to be slow bill payers and which ones are the most risky. It may be wise to demand cash on delivery for some and payment on receipt of invoice for others.
