Debt collection should be seen as part of the regular operations for any business. If you have outstanding accounts that never seem to get paid you may need to look at your existing accounts receivable procedures.
All financial procedures and policies need to be continually updated with the aim of improving the existing systems. These recommendations for improving debt collection should be seen as a starting point to get your aged receivables within a 30 day (or your required) turn around.
Look at existing systems
Set some time aside to look at the existing systems for debt control and collection. The following questions need to be answered and dealt with individually.
Are the accounts being sent out in a timely manner?
Are customer contact details current?
Have the trading terms been stated on the invoice?
Are there procedures in place for when debts remain unpaid?
If the answer is ‘no' to any of these, now is a good time to change your processes. If you are still using manual invoices and cash books, going electronic with the use of an accounting software program could be all that's needed for improvement. Many accounting systems are date driven and will prompt you when it is time to follow up on outstanding moneys.
Look at alternatives
Explore alternatives to the way you currently handle sending out the accounts. If possible hand the invoice over at the time of sale or include the invoice with the delivery. E-mail the invoice instead of posting or do both as an added reassurance the customer has in fact received notice of the due debt.
Ensure all dealings with the customer have been documented
Documenting any dealings with the customer forms part of the process of conducting a sale from the purchase order to delivery docket. Make sure deliveries are signed for confirming receipt of goods. If you have had to make phone calls and request payment take note of the date and time and the promises made or agreed terms.
Appoint a responsible staff member to handle all collections
For the smaller business or sole trader it is likely the owner will look after all collections. But if you have a responsible staff member that can handle the accounts department they will have a good idea about which of your customers pay well and on time and those that need reminders. They will also know in advance when you need to call in a debt recovery service.
Never leave old debts too long – use an agency whenever necessary
The length of time you leave a debt unpaid should be decided as part of your account procedures. Any debt that is in excess of 90 days is a warning that the bill may never be paid. Use an agency whenever you feel the outstanding accounts are too old or if there is a large amount of money owing. Remember, the earlier you refer, the more current the information and accessibility of the debtor. This gives you the greatest chance of recovery.
A Final Note
Sound financial systems are a good start to getting your accounts receivable on track. Debtor control is an important part of the running of any business. Cash at the bank is always preferable to sitting in the debtors ledger.
Consolidated Collections Australia are specialists in debt recovery and work on a No Collection No Fee basis. With over 30 years experience, CCA have developed a proven collection formula which provides industry leading results, giving you the best chance of recovering your debts as quickly as possible. For more information, visit Debt Collection
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