Pre-Collection Services

A Guide To Improve Collection Procedures

Don’t assume that accounts know your credit policy While there are usually established trade practices in every industry, it is sometimes the difference that make customers choose one supplier over another. So it is important that your accounts know what your credit policy is, to eliminate misunderstandings.

Know your customers—individually at the start of each business relationship, build credit files on your customers. No Company should extend credit without ascertaining reliability. In the event, however, those records have shown an account’s payments to be irregular, it is advisable to keep that account under close scrutiny, with immediate follow-up should payment be unusually slow. If the customer is a valued one of long standing, he demands extra consideration.

Keep your credit record current Changing market conditions and management can abruptly alter the course of a company’s health and conduct. So it’s wise to keep abreast of trade reports pertaining to specific companies.

In periods of concern, tighten your collection procedures If business conditions are uncertain, it is time to review your collection Procedures. You can’t guard against unforeseen events, but you can minimize your company’s chance of loss by adherence to your policies.Start by revising your collection letters, making them stronger and more action compelling.

Try to discourage extended payment terms Screen requests for extended payment terms carefully and try to get your sales department to discourage these requests. Too many endanger your company’s cash flow position and lead to undesirable precedents in accounts relationships as well.

Pursue partial payments with requests for the balance Generally, customers figure that by making partial payments, they will “get the heat off them.” While such payments do show good faith—and is better than none—they should not slow your effort to collect the complete outstanding balance. The best practice is to acknowledge partial payments promptly—and follow-up with communication to accelerate payment of the remainder.

Shorten your collection schedule Cut the time after an account’s due date by shortening the period from that date for continued extension of credit privileges. This “shock treatment” transmitted to a principle can sometimes exert needed leverage on accounts, particularly those who rely heavily on the supplies or services your company provides.