Menu
Search
Home My Blog Accounts Receivable Accounts Receivable
Six Steps to Managing Customer Collections

Accounts Receivable
Six Steps to Managing Customer Collections

Author: Larry Chester, Founder & President

It doesn’t make any difference what you think, a sale isn’t a sale until you collect the cash.   So, how do you make sure that you complete that sale?  Here are 6 critical steps to follow:

  1. Establish a Credit Policy – How do you know that they are able to pay you when your invoice is due?
    1. How large an order will you let them place?
    2. How soon will you expect payment?
    3. Get credit references, and don’t set a new standard.
  1. Proper invoicing – If the invoice isn’t correct, the payment will be delayed.
    1. Invoice the day you ship or you are losing money. Each day payment is delayed is time that money is missing from your pocket.
    2. Make sure the invoice is correct. The clock doesn’t start ticking till they have an accurate invoice.
  1. Call them before it’s due – especially for large orders.
    1. Make sure they received the invoice.
    2. Make sure that it’s been approved.
    3. Make sure that it’s in process in Accounts Payable.
    4. Ask them when they expect to issue the check.
  1. Don’t wait to follow up – What are you waiting for? The squeaky wheel gets the grease.
    1. If you don’t get prompt payment, call your customer.
    2. Make sure payment is in process, and ask politely when they will send the check.
    3. If you don’t get the check when they promised, call them again to see if there’s a problem.
    4. If it still doesn’t come, call them to see why they haven’t sent it.
  1. If you don’t get paid – don’t wait – stay in touch with them.
    1. What is your collection policy?
      1. Do you send statements?
      2. Do you put stickers on your statements?
    2. Call and ask for payment.
    3. Schedule future partial payments.
    4. Find out if you can stop by to pick up the check.
  1. Last resort – Call a collection agency.
    1. A collection firm might cost 20% or more.
    2. Money not collected is money lost.
    3. Anything older than 120 days is getting uncollectable.
    4. Anything older than 6 months should be written off.

Don’t wait to collect the money that your customers owe you.  The longer you wait, the less likely you will get it.  Create a credit policy and a collection policy before you need to chase those dollars.  A solid procedure will make everyone’s lives easier.

Share:

Related Posts

May 07 2020

Your Paycheck Protection Program (PPP) Loan Was Approved & Funded – What Happens Next?

What are the PPP Loan Forgiveness Rules You Should Know? By now you have probably heard about the Paycheck Protection

May 07 2020

Protecting Your Most Valuable Asset

We all know CASH IS KING. And now more than ever in these unprecedented times, we need to be protecting

Categories
Archives

Get Clarity On Your
Company’s Performance

Our people are unique CFOs. They are all operationally
based financial executives.

FREE 90-Day Survival Plan Application

Created Custom For Your Company By an Experienced CFO

Call Now Button