In periods of concern it is important to tighten up collection procedures. If business conditions are uncertain as they are today, it is crucial that collection strategies are reviewed and adapted to meet the current challenges. It is simply not enough to send another letter or make another phone call to a delinquent customer. One must conduct a full review of collections policies and re-establish rational performance goals. For example, every time a sale is made there are four chances to reaffirm general sales conditions and highlight specific payment terms.
1. Order acknowledgement: an early chance to avoid confusion over terms and conditions and payment boundaries. 2. Advice note: reaffirming key conditions. 3. Invoice: Who to pay, where to pay and when to pay. Make it easy for your customer to pay on time, state a specific date. Be clear and helpful. 4. Statement: Useful as a summary of trading activity, a reconciliation tool and a subtle reminder of due date of payment. At all times keep customers informed and updated of your organisation's credit policies. Be fi rm, fair and persistent in your follow through. It's important to develop a relationship with your customer.
Importance of accurate information. Follow the Wall Street adage, "Know your Customer". Who is my customer? What is its legal form? Where are its main bases of operations? What are its trading styles? Are personal guarantees necessary? In the event of non-payment, who does one enforce against? Simple questions and yet so often problems and delinquencies arise as a result of poor credit information about the buyer/customer.
Start your collection cycle before the money falls due. A simple customer service call to establish the point of contact, to ensure that services are carried out to specification or that the goods are received, that the invoice was received in a timely manner and that there are no reasons to withhold payment. It is also a good opportunity to re-confirm the payment due date and the method of payment. Don't assume that your customers know your credit policy and payment preferences. Establish a reliable contact and remember companies owe money, but its people that pay the bills! Continue the collection cycle after payment has been received. Why not thank the customer for their payment? The reason Kevin suggests this is that the total solution to cash collection consists of three main objectives: 1. To collect as much money as possible today. Communication forms a great part of the credit controller's ability to collect the most amount of money available today. Getting a commitment to pay more than a customer has available will inevitably result in a broken promise. 2. Preserve the customer's goodwill. Professionalism in cash collection implies professionalism in your business as a whole, so relationships can be enhanced and improved by best practice credit management. 3. Educate your customer to pay promptly. Anything less than this is not the total solution to cash collection. Simply one does not want to go through the whole collection process with customers repeatedly.
Resolve problems and disputed matters quickly. Time is money and the longer it takes to find a solution to a problem account, the less likely it will be to find an amicable solution. Deal with the problems immediately, ideally before the due date of the invoice. If the basis of a non-payment is a dispute over quality of merchandise or service, price or delivery, a mutually agreeable settlement should be arrived at promptly. The customer may use a minor dispute to withhold a substantial payment. Insist that the undisputed portion be paid immediately indicating that the small balance will be negotiated.