Setting Up Collection Systems For A Small Business

Hi,
Every small business needs a well planned system to actively monitor accounts receivable. For a system to be successfully implemented, consider the following:
1) Do most customers get paid on a regular basis for their goods and services, or are they contractual businesses who get paid on an irregular basis? It is a good idea to split these customers into categories according to criteria.
2) For regular paying customers, a collection system needs to be in place consisting of three phone calls and three letters. The first phone call is informative notifying the customer of the past due amount and obtaining a date for payment. The second phone call is made three days after the promised due date and references the first call and promised due date and the fact that payment has not been received. The customer is told that payment is due immediately, setting the date. The third phone call is to say that if payment in full is not received within forty eight hours, all action necessary to collect on the account will be taken. This may include obtaining the services of a collection agency and/or attorney. Each of the phone calls should be formalized in letter form and mailed out immediately following the call.
3) For irregular paying customers, it is necessary to follow the same collection system, only the original payment date is established at the time of purchase. In the case of some contract labor, it might be necessary to extend payment dates, as the customer might not have received expected payment for a completed contract. If this scenario unfolds, require the customer to give constant updates, as on numerous occasions, the customer might be over extended and the amount due to the customer might not cover expenses.
To collect an NSF check:
1) Call the customer to tell him or her that payment is required immediately for the check.
2) Either call or take the check to the bank the customer drew the check on to see if the check will clear. The NSF check may be presented to the customer's bank for payment after it has been returned by your bank.
3) If no payment is received within 48 hours, contact the customer to tell him or her that whatever actions necessary to collect the account will be taken. These may include collection agencies, and in some cases, turning the check over for prosecution. NSF check laws vary state to state. It is important to be informed about the ones governing your state.
4) If a decision is made to accept repayment arrangements on an NSF check, it needs to be closely monitored and short in duration. Phone calls on NSF checks should be immediately followed up with letters.
If all collection efforts fail, it is imperative to take further action as soon as possible. Statistically, the further accounts receivable age, the chances of recovery diminish.
Tomorrow I'm going to start writing about the advantages and disadvantages of renting, leasing and buying equipment for businesses.
Until then,
Alan

Collection Phone Calls

Hi:
Many small business owners avoid calling their past due accounts for a variety of reasons. The most common one is that they do not want to create ill will with their customers. The second reason is that they do not have the time to set aside to make the initial calls, and then to follow up on those calls. What a business owner says during his or her initial call to a customer can determine whether or not a customer will bring his account current. There is a standard set of three collection calls a business owner may consider using:
1) The first call is pleasant and firm, providing the customer with the exact amount that is past due. Whenever possible, a payment date should be set during the phone call.
2) The second call is short and to the point. The customer needs to know that the business owner will take whatever action necessary to collect the account. Once again, determining a specific payment date is very important.
3) If no payment is received by the specific date, it is important to give the customer one last phone call notifying him or her that the account will be turned over to a third party (collection agency/attorney) for collection.
If a business owner decides to accept a repayment schedule from a client, notify the client that it will be put in writing and mailed to him or her. It is important never to tell a client a collection technique will be implemented, if there is no intention of following through with it. If a business owner has past due accounts, but not the time or inclination to pursue them, hiring a part time employee to make collection calls might be an option.
Tomorrow I'm going to write about how to select a good collection agency or attorney.
Until then,
Alan