The Four Key Elements of an Effective Accounting / Collectivles System
Your collection process must be systematized. A subtle psychology underlies the systematized approach. Managers and executives prefer to deal with companies that have good systems in place, because such companies come across as more businesslike. There is respect and seriousness accorded with such companies.
The reverse is also true: companies that come across as un-businesslike are taken less seriously, and their invoices can easily be shoved to the bottom of the pile, to be paid later, in 60 days, 90 days, or never. Companies can be perceived as unbusinesslike because of unprofessional packaging, poorly performing products, or sloppy-looking invoices and other business correspondence.
Systematized collection systems have four key components:
- Professional appearance. All correspondence should have a professional appearance--be typewritten and with your company's name and logo. The services or products provided by you and the amount owed to you should be readily understandable, and the message about payment terms and expectations should be clearly written. Invoices that are hand-scrawled, with spelling or grammatical errors, or are unclear, give the impression that the business isn't professionally run.
- Prearranged schedule. Timing is a key issue in the area of collections. Invoices that aren't paid on time have a tendency to be put off even further. First, invoices should go out at the same time every month or immediately after the service has been rendered or the product delivered. Second, the invoices should be followed up on a regular basis--every 15 or 30 days--with statements or collection notices. These types of scheduled billing procedures convey the professionalism and seriousness that lead to prompt payment.
- A stepped message approach. Simply sending the same invoice with the amount due isn't enough. As accounts receivables drag out, the customers must be alerted to the fact that they are late in paying. The notices or correspondence you send must communicate that the invoices are seriously overdue. The customer should be reminded of the fact that you are sending a third or fourth notice. The tone of the message should become even more firm. If your terms set forth interest on overdue amounts, the amount of interest that is accumulating must be clear.
- An overall policy. Your billing approach must convey the depth of your seriousness about collections, especially for customers who are being notably resistant. The message that you have thought through the collection process and will follow through must be understood by the customer. Underlying a good collection system is the clear communication that if customers fail to pay, serious consequences could result, including the account being referred to a collection agency, loss of credit, and possibly legal action.
The Personal Touch Can Be the Right Touch
Personal attention can be very effective. Here are some tips that can work miracles:
Supplement your official billing approach with telephone calls at strategic times or to strategic people.
Compress the intervals between mailings to certain customers.
Include a personal note or letter with certain overdue notices, especially if you had been promised prompt payment. This lets the customer know you are keeping track of the situation, yet can seem a gentle reminder.
- Make sure that the invoices get into the right hands at the right times of the month for the customer.
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