Making a sale is great, but collecting the money associated with that sale is what keeps you in business. As time goes on, it becomes less and less likely that your past due accounts will be paid and the way you manage your collection of debt plays a large role in how many of those outstanding accounts you have to manage.
According to a report from the commercial collections agency association, the likelihood of collecting an invoice that is 90 days past due is only 69.6% and even if you are only at 60 days past due, you only have about a fifty percent chance of collecting on that invoice. That is a real problem considering how many of your invoices reach that 60 or 90 days past due.
Staying on top of your invoicing and keeping in regular contact with your customers it the key to making sure your invoices to not fall so far behind that you may not ever collect on them. One of the most important things you can do is get the invoice to the customer ASAP so they have no excuse later on that they did not receive the invoice until their payment period was almost over. Beyond getting the invoice to them, it is important to keep in contact with your customers. Not only is this just good customer service, it will help them to pay you on time.
But how often do you need to contact them? How often is too often? How late is too late? Here are a few tips to help you with your collection of debt and timing your follow-up communications. Note that this time table will need to be adjusted based on your individual situations and conversations you have with your debtors, but this should be a good starting point.
0-30 days: have a sales/customer service call to make sure everything was ok with the order and remind the customer about payment about one week after delivery or one week prior to the due date depending on where the account falls in that time frame.
35-40 days: call the customer to remind them of payment and be sure to make note of any promises made/broken, payment terms etc. After this conversation be sure to send a follow-up email/letter detailing the conversation.
45-40 days: reminder call #2 and send out another email/letter documenting the phone call, promises made, promises broken, payment terms, etc.
55-60 days: for companies with a small department you may not have a supervisor- so you would just send another reminder letter. For larger companies now would be the time for an escalation call by the creditor’s supervisor to the debtor manager.
65-70 days: Time for your final demand call and follow-up with your final demand collection email/letter.
80-85 days : consider sending this invoice to a third party collection service.
The biggest problem company’s face when it comes to effective collection of debt is time. Creating communications and remembering to follow up with your many customers and keeping track of where they are in the collections and communications process is tedious and time consuming unless you are using the right tools. Too many credit departments are stuck with aging reports, spreadsheets, and disparate systems which make the entire process harder, longer, and less effective. Collection of debt is made easier with tools to help you automate credit activities like communications, keep schedules for you, and basically tell you what to do and when to do it to take the hassle out of the job. Yes, these systems exist and the pricing will surprise you.