Companies that deal with commercial accounts, generally deal with fewer customers with higher balances, while the consumer based companies deal with more clients with smaller balances in their accounts receivables department. However, the basic function in the AR process generally stay the same.
The Accounts Receivables Process
- Remittance – Utilize multiple payment methods;
- Credit Management – Make sure customers are familiar with your terms, use multiple sources for initial credit checks, call business references;
- Collections – Be sure that any account past terms has been forwarded to a 3rd party collection agency or an attorney.
Early Pay Discounts
Sales discounts to encourage early payment can improve the cash flow of a business. This discount should be enough to encourage the customer to pay with the desired time, but small enough to avoid profit erosion. As with all promotions, early pay discounts should have a definitive end date as to when the promotion ends.
3rd Party Collection Agency
It is a good practice to have a definitive age when past due accounts are placed with a 3rd party collection agency. Generally it is recommended to turn over delinquent accounts after 90 days. At this point the debt is still fresh on your customer’s mind and will facilitate making you a priority. Along with have a psychological advantage, your collection agency will have tools, technology and contacts that can be used in order to have the account current quickly. Debt collection firms usually have programs in place to assist you in your internal receivables department. Other services include, demand letters, private investigators, commercial credit reports and access to legal records and information.