Collections are a necessary part of any business, big or small, and today’s economic environment makes the task even more arduous than ever. Proper and reliable cash flow is your business’ life blood, and getting a handle on a reliable and effective collections process is vital to your economic health and personal wellbeing.
The following are ten ways to improve your collections efforts:
1. Have a Defined Credit Collection Policy
One of the major causes of overdue receivables is that the organization has not defined to its clients and staff when accounts are to be paid. If clients are not educated that accounts are to be paid on time, then chances are they’ll pay late or sometimes not at all. Make sure that your office’s terms of payment are clearly stated in writing to each client.
2. Invoice Promptly and Send Statements Regularly
If you don’t have a systematic invoicing and billing system, get one. Many times the client hasn’t paid simply because they haven’t been billed or reminded to pay in a timely manner. This situation regularly occurs in smaller or newer organizations where there isn’t enough staff to invoice and bill.
3. Use “Address Service Requested”
One of the most difficult collection problems is tracking down a client who has “skipped”. All organizations should be aware of a special service offered by the U. S. Post Office. Any statement or correspondence sent out should have the words “Address Service Requested” printed or stamped on the envelope, just below your return address in the top left corner. If a statement or invoice is sent to a client who has moved without informing you of his new address, and the words “Address Service Requested” appear on the envelope, the Post Office will research this information. If they can locate a change of address on that person, they will return the envelope to you with a sticker reflecting the new address, OR send you form #3547 with the correct address (50 cent fee). This also keeps your address file up to date.
4. Contact Overdue Accounts More Frequently
No law says you can contact a client only once a month. The old adage “The squeaky wheel gets the grease” has a great deal of merit when it comes to collecting past due accounts. It’s an excellent idea to contact late payers every 10-14 days. Doing so will enable you to diplomatically remind the client of your terms of payment.
5. Use Your Aging Sheet, Not your Feelings
Many organizations (or well-meaning people on their staff) have let an account age beyond the point of ever being collected because he or she “felt” the client would pay eventually. While there certainly are a few isolated cases of unusual situations, the truth is that if you aren’t being paid, someone else is. So stick to your systematic plan of follow up. You’ll soon know who intends to really pay and who doesn’t. You can then take appropriate action once you know where you stand.
6. Make Sure Your Staff is Trained
Even “experienced” staff members can sometimes become jaded when dealing with past due clients. This usually occurs when they have made and broken promises for payment. Make sure the staff is firm, yet courteous when dealing with them. The collection staff could benefit from client service training because, in effect, they must “sell” the clients on the idea that they need to take care of the bill. Make sure that the collection staff is trained to not only bring the account current, but to also maintain good will with them.
7. Admit and Correct any Mistakes on Your Part
Sometimes clients don’t pay because they feel you’ve made a mistake. If you have, quickly admit it and correct it. The client realizes that mistakes can happen in organizations. Unfortunately, many clients believe that “the Doctors etc…don’t need the money”. Denying an obvious error only fans the fire of resentment the client may already feel.
8. Follow the Collection Laws in Your State
In many states, organizations are governed by the same collection laws as are collection agencies. For example, calling clients at an odd hour or disclosing to a third party that they owe money are just a couple of the numerous collection practices that can cause serious repercussions. If you’re not sure, call your state’s department of finance.
9. Use a Third Party Sooner
If you’ve systematically pursued the past due accounts for 60 to 90 days from the due date, (and still no payment) you’re being delivered a message by the client. More than likely, you’ve requested payment four to six times in the form of phone calls, letters and statements. Statistics show that after 90 days, the effect of in-house collection efforts wears off 80%. That means that the time and financial resources budgeted for collection efforts should be focused within the first 90 days where the bulk of the accounts can and should be collected. From that point on, a third party can motivate a client to pay in ways you cannot, simply because the demand for payment is coming from someone other than you.
10. Remember that Nobody Collects Every Account
Even by setting up and adhering to a specific collection plan, there are a few accounts that will never be collected. By identifying these accounts early, you will save yourself and your organization a great deal of time and money. Even though a few may slip by, you’ll find that overall the number of slow pay and nonpaying accounts will greatly diminish, and that’s a victory in itself!
___________________________________________________
Lynn Lolley has been a Senior Consultant with Transworld Systems Inc. for over 10 years assisting clients in managing their receivables more effectively and efficiently. Her focus is helping clients reduce the time spent on outstanding receivables while significantly improving their recovery rate.
Jane Pak currently serves as the Chief Executive Officer of the National Association of Women Business Owners, Los Angeles Chapter.
Karen J. Pordum is CEO of Legally Organized, a lifestyle management company and part-time personal assistant service (
Sheila Okabayashi is co-managing editor of the NAWBOLA Blog and President and Founder of Integrated Solution Design Group, a hybrid consulting group with a diverse palette of technical, creative, and business expertise dedicated to helping clients realize integrated, common sense marketing and business solutions. To learn more about Integrated Solution Deisgn, visit 
