The thing to keep in mind about collecting receivables is that you are in a race against time.
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Every day your money is locked up in receivables is another day you can't use that money to turn a profit for your company. Even more, the likelihood you will ever collect that money decreases with each passing day.
The plain truth is that your business can't afford to ignore collections. As a small business owner, it's your job to make sure your company has a proactive collection process. Here are a few tips to help you get started.
Tip #1: Don't procrastinate
The worst thing you can do is to procrastinate. Don't put off the collection process in the blind hope that the check might be in the mail. Chances are it's not in the mail won't be until you send a friendly reminder in the form of a letter or phone call.
Not everyone's recordkeeping system is as organized as yours. Sometimes customers really do lose track of invoices. And sometimes they don't. Either way, squeaky wheels get grease. By reminding your customers about their obligations you exponentially increase the likelihood you'll receive payment sooner rather than later.
Tip #2: Work a collection schedule - be consistent
Establish a schedule for your collections. This will require you to create a system of canned notices and letters that are mailed at predetermined points in the collection process (often in 10 to 15 day increments after the due date has passed.) At certain points, a friendly phone call or two may also be in order.
Working a schedule gives your collection process the advantage of consistency. Consistency reminds your customers of their outstanding obligations. Often, a customer will pay the invoice for no other reason than to stop receiving reminders.
Tip #3: Be flexible, but firm
Occasionally extenuating circumstances do arise. When they do, work with your customers to establish a mutually acceptable repayment schedule that is realistic and fair. But at the same time be firm in holding your customer accountable to that schedule. Never agree to a repayment schedule with a repayment date of "whenever". In most cases, "whenever" will never come.
Tip #4: Know when to call it quits
No matter how diligent you are about your collection process, there are simply some accounts you will never be able to collect. Your best chance of collecting those accounts lies with a professional collection agency. These agencies know the tricks of the trade because they specialize in collecting receivables from non-paying customers. They also have the added benefit of knowing how to leverage the customer's credit rating and other legal avenues as a collection tool.