4 Simple Steps to Maintaining Good Will During The Collection Process

 November 23rd, 2009 @ 9:36 am

The four basic rules of a successful collection strategy; one that facilitates timely payment without damaging your valuable client relationships are;

1. Start Early

2. Communicate Often

3. Stay Organized

4. Document, Document, Document

START EARLY

I have always advocated timely communication in the collection process. In fact, your attempts should begin even before your invoices actually come due. In my most recent project as the design architect for CollectPro™ software I developed both a letter and a call script that are designed to be deployed the week that your first invoice comes due with a new client. The basic strategy is to confirm that your company has been properly set up as a vendor in the customer's AP system.

"Do you have our W-9 form on file?"

"Is there any other documentation you need from us when we invoice you?"

"Was everything in order when your order was received?"

These types of questions in a call this early in the process give every outward appearance of a pro-active customer service call, but what you're ALSO doing is eliminating the source of so many "soft disputes" or stall tactics that often don't otherwise surface until 45-60 days into your internal collection efforts. As indicated in my 4th rule, the key to this call is DOCUMENTATION! Whomever is making this call for your company needs to document "When" was this call made, "Who" did they speak with, "What" is the title of this person and their phone extension. Notes should also include any information obtained regarding when your invoice is scheduled for payment.

COMMUNICATE OFTEN

I am often asked, "How often should we be communicating with our customers after the sale?". My answer is always the same... "How quickly would you like to be paid?" I know, it's annoying to answer a question with another question, but forgive me as it drives my point home.

I advocate that every collection policy be "framed" with a timeline that allows for some form of contact every 5-10 calendar days. An effective policy should begin 5 days before your Terms become due (T-5) and should continue until your efforts have been exhausted, which generally lasts 90-120 days (T+90, T+120) depending on the depth of your methodology. I am not saying that you necessarily need to schedule an action every 5 days during this timeline, but depending on your DSO aspirations scheduling an action every 10 days is  not unreasonable. Just remember, the more often you choose to communicate the LIGHTER your approach must be in the beginning and the MORE AGGRESSIVE your approach must be towards the final 30-45 days of your effort. Otherwise, your message may be lost in the progression.

STAY ORGANIZED

Sorry gang, but a bunch of post-it notes stuck to an invoice copy is NOT my recommended way to organize and document your collection efforts. In my organizations, my people document EVERYTHING into a centralized record that safely stores our data and makes it easily available to any member of the team that may need access to it along the way.

Say you call someone but don't reach them... did you leave a message? If  not, you definately should! When you do, be sure to document "who" the message was for, the date and time of the call, and "what" you said in your message. If you don't think this is crucial you are missing the big picture. There are definately patterns that can emerge that you might otherwise fail to notice.

DOCUMENT, DOCUMENT, DOCUMENT

Let's face it... we are all busy and many of us have "To Do" lists that we struggle to complete each day. For instance, you might intend to call your T+60 customers every 2-3 days, but in reality that can easily turn into every 5-7 days. With such gaps between efforts, especially if you have a long list of past-due customers to call, very few of us can count on our memory to accurately recall what happened last. Was this your 2nd voicemail message to the AP Manager or was it your 5th?

Calls where you actually reach a live person are even more important to document. I have always trained my staff to use "The 4 W's" to outline their documentation goals.

"Who did you speak with?"

"Why hasn't the bill been paid?"

"What did they say during your conversation?"

"When will payment be processed?"

These strategies are just a few of the many that were desinged into my newest project, CollectPro™ software. This easy to use software is the very first of its kind, and will help credit professionals and business managers supercharge their cash flow by creating and managing their internal collection efforts. Even employees without any background in credit & collections will benefit because all of the required knowledge and training are included within the software and its web-based online resource center. In fact, this software is so innovative that it has already been endorsed by the makers of Peachtree and Quickbooks accounting software. For more info visit www.collectprosoftware.com

To Your Success!

Thomas P. Lynch, Founder

CREDITORS RESOURCE GROUP