10 tips on Improving Business Collections

An effective collections process goes a long way to stabilising cash flow for any business. But how many business owners see its true value.

You would agree that most business customers pay their bills on time and the majority of the collections efforts are usually centred on a few customers who tend to take advantage of any loop holes. It is therefore a prudent business strategy to have an effect collections process.

Here are 10 tips to ensure that your collections processes are efficient:

1.  Ensure your customers are aware of the terms of payment and this is in writing. These terms should appear on every document sent to your customers, including invoices, statements and collection letters

2.  The longer a collection is past due the more of an effort to collect. Ensure your process are sufficient to highlight any invoices that are past due date and initiate collection process immediately

3.  The telephone is the most effective collections tool/technique, use frequently in your processes.

4.  A courteous, firm and professional collections process will provide respect from your customers and will deter delinquent payments.

5.  Ensure you ask for commitment to pay, on a specific date, by negotiating with the individual with the  authority to make the commitment and provided for in writing.

6.  Be prepared to hold orders as leverage to ensure payment of any past due invoices.

7.  Develop a specific in-house Collections treatment plan. This involves setting up different treatment for different levels of overdue payments. i.e. 0- 30 days, 30-60 days etc, this will ensure that you treat these categories with added emphasis.

8.  Outsource any past due payment that are more than 90 days to collection specialists. This will allow you to direct your efforts to more collectable amounts.

9.  Ensure you have good communication with your customers from the onset. This will help to ensure any issue that arise which could stop payments, are addressed prior to payment date.

10. Many collections problems result from poor or inadequate initial customer investigation (credit checks). It is prudent business practise to have some investigation on your customers before you offer any form of credit. This will ensure your business is trading with customers who are good payers and provide for good cash flow to your business.