13 Strategies to Speed up Collections

Heading towards the end of each month and when quarter-end is nearing, many creditors scramble to get their accounts receivable up to date. In fact, most companies wait until an invoice is past due before taking any action at all. But why not be proactive?

The following strategies can be used to get accounts paid before they are due and speed up the collection process.

1. Update your A/R management software. Ineffective systems not only slow the process down but fail to provide the intelligence required to improve your credit to cash results.
2. Reevaluate your lockbox placement. If you use one or more lockboxes, do a study to determine if they are placed in the optimum location for collections. Lockbox studies should be done periodically, and lockbox business should not be automatically given to a local bank. Depending on the amount of business going through your lockbox, more than one location may be desirable.
3. Review your policy regarding billing dates and procedures. Make sure invoices are mailed on a regularly scheduled basis and that they include all necessary information. Include your payment terms and any past due interest charged on the invoice itself.
   Some companies have sped up collections simply by changing their billing cycle from twice-a-month to once-a-week. Another idea is to invoice early in the month. Many companies do a once-a-month check run and, if your invoice happens to miss their monthly run, you’ll have to wait another 30 days to get paid.
4. Review the technology your company is utilizing to interact with customers. Are you using e-mail, imaging, EDI, faxes, voice mail, electronic bill presentment and payment? While all might not be appropriate for your organization, using one or more might speed things up.
5. Discuss your terms with your buyer at the time of sale. Make sure they are agreeable. Also, discuss the best way of getting paid before you ship or begin work. Will it speed up payment if you send the invoice to the actual buyer rather than the Accounts Payable department? Who has to authorize it?
6. Make it easy for the customer to pay you. This may seem like common sense, but it’s an element that is often overlooked. Offer all standard payment options. Ensure that your invoices have the correct contact information and postal address for remittance. Include a payment envelope with the correct remittance address. Use invoices that make it easy for the customer to remit, as well as easy for them to keep a record of the invoice and payment.
7. Review your experience with the late-paying customer. Has this customer been a consistently late payer? Does he wait until you call, before paying you? Has anything changed with the customer? Knowing how your customer responds and what he needs to get him into payment mode can give you the edge in keeping his account current.
   If you aren’t already a member, join a credit group. This will provide you with the relevant, current information you need to stay on top of your accounts. Click here for information on ABC-Amega’s Credit Services.
8. Review your company’s overall procedures to see if you can determine why payments are late. Are there any procedures that you can tighten up to in order to speed up payments? For instance:
   • Are shipments accurate? Were delivery and quality promises kept by your firm?
   • Are your salespeople making promises your company isn’t able to keep?
   • Are invoices being sent timely? Are they accurate? Do they include all necessary information, including a phone number for billing inquiries? Were they sent to the correct address and attention?
   • Are follow-up contacts being made on a regularly scheduled basis?
   • Are you placing with collection professionals on a timely basis?
9. Develop a specific collection plan and stick to it. For instance:
   • Call 7-10 days prior to the due date to ensure the products/services were received timely, there are no disputes, and the customer plans to pay (and when).
   • Call within a week after payment is due to find out what is delaying the payment, and to get a payment commitment from the customer.
   • If the customer reneges on their payment promise, contact them again until payment is received. If it’s not received within 90 days after the due date, hand off the account to the professionals.
   • If possible, and especially for larger past due balances, don’t rely on letters, faxes or emails, which can be easily ignored or “lost” in transit. Make a phone call.
   • Very important: record any promises made by the customer, including the date they were made and the date payment was promised. Saying to a customer, “When we spoke on Monday, May 25th, you promised payment by Friday, May 29th”, puts the debtor on the spot ” much more so than a vague recollection of the conversation.  If you can’t manage to stay with a collection schedule in-house, consider outsourcing to a first-party collections outsourcing firm.
10. Create “collection specialists” within your credit department and provide some collector training. If everyone in the department has multiple responsibilities, you can be sure that collecting will be the last thing they do. Why? Because it’s uncomfortable asking for money from customers.
11. Recruit branch managers and salespeople to help in the collection effort. In many cases, these are the people closest to the customer with the greatest ability to impact the collection cycle.
12. After a reasonable period of time (say, 30 days) contact the person that directly purchased from or hired you. Send them a copy of the invoice. If you are supplying to a medium to large business, it’s likely the person who bought your product or service has nothing to do with Accounts Payable. However, they’re usually happy to help, especially if the product or service was “as promised”.
13. Develop a personal relationship with the Accounts Payable managers at your largest customers. If more than one person handles your account, always ask for the same person and attempt to develop a rapport with that individual.