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Get Paid on Time! Four Useful Collection Tips

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In today’s changing economicclimate, it’s important for your business to maintain and improve cash flow.

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One way to do this is to tightenup credit and collections policies.

Following are some usefulsuggestions that can help you do that. Although some of the tips discussed heremay not be suitable for every business, they can serve as general guidelines tohelp improve cash flow. We, therefore, advise our clients to consider thefollowing, yet contact us for proper implementation.

Define Your Policy

It is important to have a clearcredit policy. Your sales force should not be able to sell to customers who arenot credit worthy or have become delinquent. Define and stick to concretecredit guidelines. You should also clearly delineate the leeway thatsalespeople have to vary from these guidelines in attempting to attractcustomers.

A system of controls for checkingout a potential customer’s credit should     be in place, and it should be used beforean order is completed. Further, there should be clear communication betweenaccounting and the sales department about current customers who becomedelinquent or otherwise contravene credit policy.

Tell Customers About Your Paymentand Collection Policy

Invoices should contain clearwritten information about how much time customers have to pay and what willhappen if they exceed those limits. Make sure your invoices include a telephonenumber customers can call with billing questions.

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The faster invoices are sent, thefaster you will receive payment. For most businesses, it’s best to provide aninvoice at the time of sale, not afterwards in a separate mailing.

Once again, our firm believes intailoring this procedure to a client’s particular business, as this may be asensitive issue.

Follow Through on Your Payment andCollection Terms

If your policy states that latepayers will go into collection after 60 days, then you should stick to thatpolicy. Someone – but not a salesperson – should call all late payers and askfor payment. Accounts of those who exceed your payment deadlines should bepenalized and/or sent into collection, if that is your stated policy.

Set policies that are realisticfor both you and your customers. Realistic policies can be determined byanalyzing your business and its customer base.

Train Staff Appropriately

The person you designate to makecalls to delinquent customers must be apprised of the seriousness andprofessionalism required for the task.

Here is a suggested routine forcalls to delinquent payers:

• Become familiar with theaccount’s history and any past and present invoices;

• Call the customer and ask tospeak with whomever has the authority to make payment;

• Demand payment in plain,non-apologetic terms;

• If the customer offers payment,ask for specific dates and terms. If no payment is offered, tell the customerwhat the consequences (if any) will be;

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• Take notes of the conversationand keep them in a log;

• Make a follow-up call if nopayment is received, and refer to the notes taken as to any promised payments.

Again, keep in mind that the abovetips are general collections policies that most every company should have. Fromour experience, we have found that no two companies are exactly alike. We,therefore, advise you to have a collection policy specifically tailored to youroperation prior to implementation.


RichardL. Lipton CPA & Associates LLC, located in Florham Park, N.J.,draws on its founder’s 10 years as a stockholder and manager offamily-owned Sam’s Tire Co. in Paterson, N.J.

RichardL. Lipton CPA & Associates LLC “is structured to personally servelarge and small clients who have a need for business consultingservices as well as accounting and tax services. We have even developeda niche in the area of forensic accounting. Our clients have realizedthat this combination of skills is extremely valuable in providing thehighest quality professional services in today’s and the future’seconomy.” – Richard L. Lipton CPA
 
Contact Richard L. Lipton CPA & Associates LLC:

Call: 973-520-8123
E-mail: [email protected]
Web: www.liptoncpa.com

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