Collection Tips For Getting Paid Faster By Customers

Collection Tips For Getting Paid Faster By Customers or Business Clients

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One of the biggest mistakes a company routinely makes is waiting until a bill is past due to begin collection efforts. A good credit department reduces bad debt and past due accounts by getting proactive about debts collected, preferably before the due date. Collection of debts should be the final step in the sales process, beginning as soon as the debt is incurred, according to Todd McDaniel, founder of Dynavistics, a Brandon, Florida tech company that provides accounts receivable software called Collect-IT.

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McDaniel notes that slow collections are costly for businesses of all sizes. Stats show that 26% of invoices that are three months old are uncollectable while 70% of invoices that are six months old never get paid.

Here’s how to begin your company’s collection efforts before the due date:

  1. Send invoices out in a timely manner.Many customers enter the invoice received date and calculate the payment due date from there. Some companies send out invoices daily or as soon as the customer receives the product or service. If your invoices only go out once a week you could be losing 3-5 days in the collection cycle.
  2. Terms and due dates should be prominently featured on the invoice document. Customers will take the path of least resistance and use default terms if your invoice does not spell out the terms in bold letters. This is especially important if you use multiple terms for different invoices or items with the same customer. If you have customers who consistently pay late by the same number a days, take a moment to call their billing department to go over the terms on your vendor account. Have the person you speak to locate the terms on the invoice, and confirm that they jot them down accurately as notes in your vendor account.
  3. Get customers to accept invoices electronically to avoid postal costs and delays. EDI or email invoices can reduce processing time for you and your customer. There are numerous cost and delays when sending out a physical invoice. First, it takes time and staff to print out, fold, stuff the envelopes, and stamp physical invoices. Then, there is a cost to deliver the mail to the post office or arrange for and ensure the postal employee picks up the mail from your office. Finally, once USPS receives the mail, postal delivery can take 1-3 days for delivery. Electronically delivered invoices remove these staffing cost and time delays.
  4. Deliver invoices to the right contact. Make sure your invoices are going to the right person at the right location to avoid delays in processing. Sometimes a customer may require an invoice be sent to the location that incurred the debt, while other companies use a centralized A/P department for all invoices.
  5. Become intimately familiar with your client’s approval process. This information can help you determine where your invoices are in the process of being paid, and help you change your delivery method or destination to improve the speed of processing. After your customer has received the invoice, collection efforts should continue to completion. An automated email reminding customers of upcoming payments due, or a phone call for larger transactions, may be the difference between an on-time payment and one that is 2 weeks late.
  6. Implement a credit and collections application. Collect-IT is a  software application that can help your credit department start the collection process earlier to decrease Days Sales Outstanding and improve cash flow. Collect-IT allows easy creation and deployment of an automated collection strategy and helps with mundane and labor intensive tasks associated with A/R management such as emailing customers, scheduling phone calls, and creating collection letters.