While operating a successful business is in itself a difficult task, operating a successful business in these tumultuous economic times can seem like an impossible one. Not only are business owners suffering, but so are their customers. This circumstance can require the business to take on the new and often uncomfortable role of collector.
Discomfort such as this is often created by the customer pleading with the business to allow “one more week” before expecting payment. One week typically turns into several weeks and before either party realizes it, the account is months in arrears. In order to survive, the business owner must decisively step into bill-collector mode.
There are several simple steps businesses can take to assist with the swift collection of accounts receivable. One important step is to utilize an organized billing procedure. It is important that the business be able to readily identify the invoices or other documents evidencing the goods or services provided to the non-paying customer. Under ideal circumstances, if payment cannot be received at the time services are rendered, invoices should be issued to the customer within days of when the services or goods were provided. Stale invoices will lead to stale accounts receivable.
Following a simple system whereby payment is due within no more than thirty days of the invoice date will help to ensure that the business is able to readily identify accounts that are past due. Businesses should take steps to ensure that frequent bill reminders are issued to its customers who do not pay within the prescribed time frame and, if appropriate, maintain copies of the reminder letters. In addition to bill reminder letters, simple phone calls to customers are also important and are evidence to the customer that the business intends to collect on the account. Once a customer’s account becomes past due, it is important that the business either stop providing further goods or services or require the customer to pay for future goods or services before they are provided.
Finally, businesses should consider setting a drop-dead date upon which any unpaid invoice or account is turned over for more aggressive collection by a third party collector. Many law firms will accept collection cases on a contingency basis whereby the firm’s fees are paid from the sums collected from the customer, thereby reducing the out-of-pocket expense to the cost of any necessary court fees. Not surprisingly, accounts long ignored will often be readily paid following the issuance of a demand letter or legal action for repayment.« Back to news