Google+

«

»

Jun 06

Print this Post

In-House Collection Policy Overview

ALBERT EINSTEIN: “The definition of insanity is doing the same thing over and over again, and expecting different results.”

Despite best efforts in evaluating when to extend credit and for how much, some customers will still become delinquent. The easiest way to reduce your profit or worse, go out of business, is through an escalating loss of revenue. Revenue is what you use to pay all your bills. A/R is nothing more than revenue that has not been received yet. A/R obviously poses risk to the company to which the money is owed. It is a calculated risk in many cases when it is a result of a credit extension policy. If the A/R is created by something like a bad check or charge back, it is obviously more serious. In either case, controlling A/R delinquency is of paramount importance to the financial well-being of your business.

Once an account is 30 days past due it is critical that you establish a procedure for handling these aged accounts. Your procedure should consist of a combination of an escalating letter series along with telephone contact. It is also important that you document your efforts in some way. If you utilize a focused in-house collection procedure and are unable to resolve an account at 90 days, it is time to send a formal demand letter. Once the demand letter expires you need to consider a new approach before you wind up just duplicating your own efforts. This is where Einstein’s definition of insanity comes into play (no offense intended, just trying to drive a point home). Sending a final demand letter and then following up by phone or sending more letters totally dilutes the spirit of the demand. Doing this will rarely result in a positive outcome and gives the debtor a sense of immunity. At this point you are operating from a weak position, with your debtor having the upper hand.

C2C Resources offers a web-based collection software program that is free to use. It provides tools that will enable you to focus your A/R efforts and can help you in formulating and implementing an effective internal collection policy. There is no cost or commitment required and is provided by C2C Resources in an effort to assist our partners in navigating pitfalls associated with aged receivables. Use of the system will result in fewer accounts hitting that all-important 90 day mark and will result in more efficient cash flow for your business.

Permanent link to this article: http://c2cresourcesblog.com/in-house-collection-policy-overview

%d bloggers like this: