Tips for Collecting Your Past Due Accounts Receivable: Create a System

By: Greg Beverly
Submitted: 2007-01-17 15:36:56
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One of the biggest drains on the cash flow of small businesses is the slow collection of accounts receivable. In cases where accounts receivable are out of control, you can bet that cash flow is out of control as well. I don't know about you, but the folks I have to pay are not very concerned with whether or not I am getting paid in a timely manner. They want their money. Why is it then that we have such a difficult time holding our customers to the same standard. Why on earth should we feel guilty calling our customers to ask for OUR money? I don't know, but many of us do.

The easiest thing to do is to put off contacting the customer for another day or two or worse, send a letter that either gets ignored or thrown in the trash. Most businesses take the easy way out. A short impersonal letter asking for past due payment helps you to feel as though you are doing something about your problem and also helps you avoid the personal conversation with your customer. Unfortunately, letters while better than nothing, do not get nearly the results that are obtained through personal contact.

The best and easiest way to make sure that all of your past due customers are contacted and contacted regularly and at scheduled intervals is to set up a system for contact. Your system should include the timing and content of each of your contacts. For instance, set up your contact to be x days after the due date. Your second contact should be x+7 days later, etc. The second and third contacts are just as important as the first. It shows that you are on top of the situation and are not going to go away.

You should have a script that you use in these situations. This forces you to make the contact. Each day you will know exactly who is late and what call or contact they are due for. This takes away the guesswork and the procrastination.

There is a time for letters and written communication. That time comes when your personal contact has not been rewarded with payment. It is now that, unfortunately, you must begin to build a file that you can use should collection or legal action become necessary. As with the personal contacts, you should have standard letters for each situation. Letters for x days past due, letters for missing a promised payment, etc.

Yes, there is alot involved in setting up an accounts receivable collection system. But what is it worth to you? How much of YOUR cash is currently out of your reach because of past dues? Once you have the system set up, it will save you hours and hours of time and thousands of dollars in bad debts. How great would it be if you could look at all of your past dues and know exactly what to do and exactly when to do it? What if you already knew exactly what you were going to say or write for each? How much would it be worth to cut your past dues in half? How about cutting them by 75% or more?

That's the power of a system. Specifically that's the power of having an accounts receivable collection system. No more guesswork, no more inconsistencies and lots more cash in your bank account.

Article source: Expert Articles