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crm Top 10 Tips To Receivables Management

  1. Begin with a customer application.
    The customer application is often part of the on-boarding process and should include the customer legal and DBA names, the EIN or other regulatory corporate and tax identification numbers, the primary bank name, the names of owners or principals (particularly if it’s an LLC corporation or partnership) and website address. If a customer later becomes a debtor the information captured on the application will be valuable in aiding the options and chances for collection.

  2. Evaluate the need for credit application.
    Extending credit should be based on credit worthiness. Credit applications quantifiably measure and weight credit availability and ultimately reduce bad debt write-offs. You may also need to evaluate the need for personal guarantees when extending credit. Personal guarantees can provide additional security to cover uncollectable receivables.

  3. Consider early payment terms.
    A slight discount for early payment, such as '2/10 Net 30', can avoid late payers from the start. A small discount to promote rapid collections and maintaining the customer relationship can be a sound investment. However, one note of caution. Some companies implement a practice of taking early payment discounts even if they do not meet the terms.

  4. Enforce collections from the first invoice.
    Permitting the first customer invoice to be paid beyond payment terms will set the stage and future behavior for all subsequent invoices. If the first late invoice is followed up with a professional but firm expectation of on time payment, all subsequent invoices are much more likely to be paid on time without the constant need for collections follow-up.

  5. Invoice early and often.
    More frequent billing intervals reduces the time needed to recognize troubled accounts and increases cash flow. Act timely on all late invoices and resend invoices frequently. Resending duplicate outstanding invoices provides a continuous reminder to the customer that you intend to collect all owed amounts and also may provide a 'book account' legal claim of action, which means you may be able to establish that the customer receiving the invoices never objected, thereby helping to establish liability. Consult your attorney for more information on this topic.

  6. Send customer statements.
    Periodic customer statements provide another friendly reminder of outstanding liabilities. Further, a 2009 study by the AICA shows that customer statements which also provide a payment mechanism on the document often result in payment collections where invoices alone do not.

  7. Photocopy customer checks.
    Retaining photocopied customer checks can provide your company with the name of the paying entity (if different from the customer name), the name and title of the person who is the authorized signer and the bank name and bank account number. This information is very helpful if you ever need to file a bank restraining notice. Also, in some countries and states of the US, if the authorized signer does not indicate his corporate title, that person may be individually liable for corporate debts.

  8. Respond to late payments with a D&B report.
    You may want to order an online Dun & Bradstreet Report when customers fail to pay in order determine if other creditors of the customer are also not getting paid. This will inform you whether you are the only company not getting paid and whether the customer's claims of poverty are legitimate. Armed with this information, you may further consider if and when to take quick legal action in an effort to beat other creditors to claims. If you are a secured creditor, you need to know where your collateral resides. In this scenario, it can be very wise to take a trip to the customer business location where you think the secured collateral resides to verify.

  9. Leverage a good collection agency.
    A good collection agency sends repeated well written letters and makes continuous convincing telephone in order to persuade the debtor to relieve their liability. Their tenacity and perseverance are often most useful on high volume, low balance outstanding amounts. These agencies often charge between 15 and 33 percent of recovered amounts. It may be advisable to make sure your collection agency is a member of either the American Collectors Association or the Commercial Law League of America.

  10. Use a collection attorney when necessary.
    Finding a good attorney is tough and a good collections attorney is no different. Similar to the collection agencies, many lawyers accept these assignments on a contingency fee basis (i.e. legal fees are not owed if funds are not collected). Also, your attorney may advise you that filing a collections suit entitles you to request extra damages such as interest. Further, any legal settlements may be able to be enforced by a court order so that if the debtor again defaults, a legal judgment may be entered. Creditors in the U.S. generally pay their own legal fees while in other countries the prevailing party may be entitled to legal fees reimbursement by the losing party. A competent attorney can advise you where to initiate your collection suit. If the debtor is out of state and you file suit where your business is located, it may be more convenient for you (and far less convenient for the debtor), however, filing suit in the debtors jurisdiction may earn you a judgment in an area where the debtor has assets which may improve the opportunity for collection. Debtors may also be more likely to settle faster in order to minimize the visibility of the suit in their home location.

Reputable on premise and online accounting software systems can aid and automate the quote to collections processes, including credit application processing, D&B system integration, simplified quote management, quote to order conversions, automated invoicing, on-demand A/R aging statements, scheduled customer statement delivery and automated collections management practices.

Top 10 Tips To Receivables Management  

Financial Software Best Practices

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Collections Best Practices:
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Consider credit applications

Use early payment terms
Invoice early and often
Use customer statements
Photocopy customer checks
Use a collection agency


tags Tags:
collection best practices, erp software, accounts receivable, customer statements, collections, billings, accounting software, on-demand finance, billing saas, ar




















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