Planning is the hallmark of any successful business, and this is true at every step of the way, including accounts receivable. Having all of the operational ducks in a row before a customer incurs debt can mean collecting that debt in a timely manner and with a strong customer relationship still intact.
It’s always a good idea to think defensively when it comes to accounts receivable collection methods, and it’s something you can still do with empathy. Euler Hermes Canada weighs in on this topic here.
Being proactive means creating protocols and then communicating them well to staff. It’s also important to note that you should continually improve on existing practices, to see what works for all types of customer situations.
Here’s a look at what to consider:
Have documentation in place
This includes forms drafted by an attorney that would cover contractual obligations, timelines for payment, collection expenses and late fees and other consequences. A terms and conditions agreement is also important to include.
Disseminate information
Make sure everyone who may be involved is aware of the protocols, including customer-facing staff members. Making sure to communicate the limits of required actions is very important at this stage.
Make an A/R aging report
This is a report that will be vital to providing visibility of outstanding debt and how long something has been uncollected. Sorting them by age — 30 days past due, 60 days past due, etc. — can help you keep track of accounts if you have different policies for each of these due dates.
Introduce incentives for early payment
Starting at the point when debt is being acquired, be sure to offer a percentage discount to customers if they pay on or before the due date. Make it also clear on any invoices that paying on time means no late fee penalties.
Payment plans can be a great asset
Just like a business that relies on consistent cash flow, people also can benefit from spacing out payments instead of settling debt in one lump sum. Just make sure that it’s offered in a contractual form with all of the terms spelled out, including number of payments and due dates.
Balancing caution-placed planning with informing relevant staff on the rules of the road can go a long way in strengthening customer relations. Treating everyone with compassion and making an attempt to understand their situation is something every business owner should embrace. It’s also a major tenant of what we do at ARO, making it our purpose to not only reconcile debt but to also do that with a personal touch. Find out more about what we have to offer businesses at our website.
