We need to get overdue invoices paid. I usually think of open invoices as gas in the tank waiting to be put to use. Unfortunately our clients don’t seem to be paying their bills as fast as usual. It feels like we’re running out of gas. It’s getting overwhelming. Outstanding accounts are going to bury our company. Or worse – take our house if they don’t get paid. What can we do?
THOUGHTS OF THE DAY: Get overdue invoices paid as quickly as possible by getting others on board to help. Figure out why invoices aren’t being paid. Implement new practices to manage collections in the future. Begin to work out a payment plan with clients that are seriously delinquent.
Don’t try and do this all by yourself.
Riding hard on customers who haven’t paid can be time-consuming. Likewise, success comes from staying on top of collections every day. You have a lot of demands on your time already. Best to keep focused on the big picture, including sales, production, people management, and overall direction for your company.
Get overdue invoices paid by customers who won’t pay their bills. Figure out why.
Set up a bill collections team with specific assignments.
In other words, add several hours per week to clean up outstanding balances. Hold a team meeting twice each week to share information on what’s going on. Pay attention to who’s having success with their assignments and who needs more help.
Have someone from operations check on whether clients received delivery and are satisfied. If customers aren’t satisfied, find out what needs to be done to fix the problem, get an agreement that fixing the problem will result in quick payment, and then take care of it. That may mean dealing with what was delivered. In other cases, a credit adjustment may take care of it. After that, decide how much authority you want to delegate when it comes to issuing credits. For example: Get involved if the credit is more than 5 percent of the outstanding invoice, or more than $500. If it’s less, authorize others to routinely go ahead and make the offer.
Check the credit standing of every client.
Get overdue invoices paid. Above all, a good place to start is with the clients who are most delinquent. Look up their credit histories with one of the reporting agencies. Armed with that information, have your people contact their finance departments, find the people in charge and ask, “What’s the holdup?”
Implement new practices to manage future collections.
To clarify, develop a report listing all customers. After that, set up columns to describe reasons for the delay: new invoices, dissatisfaction, customer policy to pay late, the customer having financial difficulty, etc. Track the size and source of the collections problems. Then, record dollar amounts. In addition, develop a second report listing customers with the amount due columns: current, 30-, 60-, 90-, more than 90 days. Focus on working down the oldest balances first.
Begin with seriously delinquent clients to get overdue invoices paid.
Above all, do everything you can to get your company to the front of the line. For example, if lack of payment is tied to the customer’s cash flow, jump on it. Find out who has the authority to issue payments. Above all, negotiate terms with that person. Put a weekly schedule of payments in place. Call on Mondays to find out if last week’s check was issued and what day this week another will be going out. Accept credit card payments. Issue a lien. Hold up future work. Do as much as possible as soon as possible to get paid.
After that, if your team isn’t getting anywhere, send the invoices to a collections agency. In short, let the professionals do their job. The collection agency will take a portion of what’s collected. No worries. You’re getting some money in and freeing up time to focus on accounts. Subsequently, yield results for your bottom line.
LOOKING FOR A GOOD BOOK?
Try “Essentials of Credit, Collections, and Accounts Receivable” by Mary S. Schaeffer.
