It’s a common practice amount businesses, big and small, to wait until an account is delinquent to begin a successful collection strategy. Ideally, there would be a good strategy in place at the final step in the sales process. The best way to reduce bad debt and late payments is by getting proactive about collecting the debts, before they become delinquent. We can help you get your accounts receivable under control.
Slow collections can paralyze a company and slow growth tremendously. A slow start within the collection process can mean the debt may never get paid. Statistics show that 26% of invoices that get to 3 months old are uncollectable, however 70% that are 6 months old will never get paid.
Here are some good ideas to put into place to make sure your company is being proactive:
1. Time is of the essence. Remember, most customers are going by the date the invoice was received and not by the date of service and will figure their due date from there. If you’re sending invoices once a week, you’re already behind in the collection process.
2. Be bold within your invoice and make due dates and terms stand out. Don’t leave it up to the customer to determine the due date(s). It’s human nature to procrastinate and not having a due date, makes your invoice twice as likely to end up in the bottom of the pile. Don’t be afraid to contact the billing department about your terms and make sure they are on the same page. You’re building a relationship and communication will be much easier when you have a go to person within the billing department.
3. Streamline your invoices and get your customers to go paperless. Paperless billing speeds up the processing time for both parties. This takes away the time it takes for the mail to arrive and takes away the expense of mailing an invoice. At the same time, you have created another form of communication with your client.
4. Make sure the invoices are getting to the correct location. It still amazes me the number of accounts we receive where an invoice was lost or not sent to the correct location. Once we are able to find out where the invoice needs to go and submit it again, the invoice gets paid. It was never really a collection account to begin with, but rather an invoicing issue that was never established from the beginning. Make sure there is a good understanding of where the invoice needs to be submitted. Larger corporations may have several offices that handle accounts payable.
5. Know your client’s authorization and approval processes. Knowing this process can help identify an invoice that may have been overlooked. Be familiar with the process each client has once an invoice is received so you can track the progress and know when it will be paid. There is nothing wrong with sending an automated message letting your customer know of an upcoming due date. This may be the difference between getting paid on time, or a week or two late.
6. Have a collection strategy in place from the beginning of the sale. Be open with your collection policies and make them visible at the point of sale. Occasionally there will be an account that will become delinquent. Being able to identify this account early will make a huge impact on collections. Should you need the assistance of a collection agency, you will know that all your bases have been covered and you’ve given the agency a jump start for the collection process.