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Collection Tactics

(December 2011) posted on Tue Nov 08, 2011

We have to manage our business with much more diligence than ever before.


By Marty McGhie

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In the past few years, we have seen more and more of our large customers – that is, those with leverage – insist on extended payment terms such as net 60 days, along with fewer and fewer of our own vendors offering reasonable discounts for early payment. These factors have made cash-flow management all the more challenging.

To help in your receivables collections, consider the following tactics:

• Don’t collect on accounts by committee: If you’re able to designate one person to be in charge of your collections, then the people on the other end of the call will get used to dealing with that person all the time. A relationship – ideally, an amicable one – will begin to develop and you will find better success. But the key is devoting a lot of attention to daily collections.

• Ensure your collection process begins long before the account becomes overdue: Surely you’re familiar with those of your customers that are traditionally slow to pay. Get ahead of the game by making sure at the two-week mark that all invoices from your company are recorded and approved in your customer’s payable system (our A/P clerk simply makes a call to our customer’s A/P rep). That alone can make a tremendous difference in the collection process. Some of your major clients may actually pay very well, but if you don’t follow the proper protocols for payment such as authorized purchase orders, proper approvals, etc., you’ll always end up with delayed payments. By taking a proactive approach, you can stay on top of traditionally slow payers and help avoid a lengthy collection process.

• Set some policies that have some teeth: For example, if a customer’s account is 60 days overdue, don’t be afraid to place them on credit hold and refuse to release any further work until they are caught up on their account. This hardball approach might make you a little nervous about losing your client, but don’t worry. Let them know that this is your company policy and it applies to 100-percent of your customers.


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