Credit & Collections: Polishing Your Best Practices in the New Economic Era

While many of them are classic in nature there are some new optimal procedures that have developed over the last two years that will minimize your organization39s ongoing COVIDrelated challenges while maximizing profitsBefore I get into some of the newer learnings here are some perennial practices that are criticalFor new customers determine creditworthiness Analyzing a customer39s ability to pay up front could save you time and money by minimizing or eliminating collection efforts and costs later Offer payment terms commensurate with a customer39s abilities For marginal customers consider payment in advance or partial cash in advance with the balance due within 30 daysPrioritize your collection efforts New customers and highstakes customers should be at the top of your action list The former need to know at the outset of your relationship that you will enforce your policies The latter need to stay current because you have too much to lose if they do not Slow pays should be your third priority Those with an established pattern of paying late this past year will likely continue to pay late if allowed the luxuryEnforce your terms of payment Start the collection process when the account falls 15 days past due Follow up at least once a week starting with the larger accounts that owe greater amounts Communicate directly with the decisionmaker You never want to let a customer think that an extra week or two makes hardly any difference to youAs outlined in your company39s policies and procedures be prepared to revoke credit privileges on overdue accounts at 60 days past due typically and then enlist thirdparty help when the accounts are 90 to 120 days past duePick up the phone It is still the collector39s best friend and short of a facetoface meeting the best tool for relating effectively with the customer Clearly state your reason for calling and request prompt payment Suggest solutions if you suspect your customer is having difficulty making payment Consider enlisting the help of the account39s sales rep either for the first try or after your first try meets with resistance Stay positive and polite no matter what happensSend effective written communications After that telephone call a followup letter via mail fax or email is critical to your confirmation processThe firstreminder letter should have a mild and nonaccusatory tone and should offer the suggestion that the nonpayment is probably the result of an oversight Future communications should reflect growing concern and should include a positively phrased benefit statement to motivate the debtor to pay quotPayment of the invoice by the 10th will ensure your continued favorable credit standingquotThe finaldemandotheraction letter contains your final request plus a statement of your next action if you are not paid quotOther actionquot usually means referring the account to a thirdparty collector In any case collection letters should always comply with federal and state legislationYour organization can develop its own form letters with two or three customizable variations of each message Send your requestforpayment letter on company stationery to convey a professional image You might also develop guidelines to help collectors personalize the letters without changing the message or impactExplain how you wish your customer to render payment such as a link to a secure online payment portal Offer to answer any questions about the payment and include your direct phone numberMake it easy for the customer to pay This may seem like common sense but it is an element that is often overlooked Make sure invoices are sent on a regularly scheduled basis and that they include all necessary information Include your payment terms and any past due interest charged on the invoice itselfInvoices should include a due date or state a range such as quotdue in 21 daysquot Avoid jargon such as net 15 or net 30 Some customers may understand that means within 15 or 30 days respectively but not allCan customers easily pay online with ACH credit cards PayPal wire transfer or other automated payment options Electronic payments take any quotit must be lost in the mailquot claims out of play and give your customers immediate confirmation that their payment was receivedDocument all communications Follow up every telephone or video conferencing conversation with an email summarizing the discussion and attach any invoices in question along with copies of any contracts and your terms of payment This recordkeeping is vital down the road if you end up in court with a delinquent customerTeam up with sales Make sure salespeople clearly explain your payment terms at the time of sale on new accounts Consider asking the sales rep to help collect a delinquent account If they have a friendly relationship with a customer that customer may be more forthcoming and receptive Notify salespeople when their accounts become delinquent and again when they become currentGive established customers a break Even your best customer may have trouble paying occasionally Everyone wins when your customer weathers a shortterm difficulty and gets back in the black In fact some customers might reward your loyalty by buying more when their business picks up Do not alter your payment terms but be willing to allow a temporary grace period or spread the amount due into multiple paymentsKnow when to reach out to a thirdparty collector Engage the services of a collection service at 90 days past due or less in more perishable circumstances and 120 days for less perishable If there is a dispute or denial of liability provide your collection service with complete informationCentralize all pertinent documents into a single file Do not engage in any collection activity once the account is placed and notify the collector of any payments received by the customer as well as any conversations the customer had with anyone in your companyLessons LearnedIn addition to illness and death the pandemic brought business closures amp8211 temporary and permanent amp8211 labor shortages and material shortages along with the difficulties of managing remote working teams Thankfully many lessons have been learned that can help us sidestep some obstacles in the future Here are suggestionsEstablish backtooffice protocols Even with video conferencing not all job functions can amp8211 or should amp8211 be done remotely However returning to the office can be difficult The safety and wellbeing of your staff is paramount so follow the guidelines of the Centers for Disease Control and Prevention as well as your local government to make sure your workplace conformsInform returning workers in advance of any vaccination testing and inoffice behaviors they are expected to follow Additionally post signage as reminders and to notify visitors of your protocolsAddress staff attrition and wellbeing All economic indicators show that the labor shortage is expected to continue Many businesses are struggling to find qualified applicants or are offering higher salaries and hiring bonuses to their best candidatesRetaining talent needs to be a priority It39s perhaps even more important than recruiting the right new employees Incentives such as pay raises bonuses workathome days and other perks can help keep your fully trained team members enthusiastic and on the job Of equal importance is acknowledgment of the personal challenges caused by working from home andor reduced personnelVideo conference often with remote staff By now most professionals have gotten pretty Zoomsavvy We all well most of us have learned how to create tropicalthemed backgrounds view our coworkers as if they are sitting together in a movie theater and hit that mute button just as a pet or a child barks or criesWhile it may be a preferred means of corporate communication collaboration is not as easy as it is when sitting around a conference table or batting ideas back and forth in the break room Regularly scheduled online team meetings are vital to keep everyone involved and investedThe Known and UnknownThe private and government partnership to fight the pandemic has been nothing short of monumental As we know however we are not out of the woods yet with mutations of the virus continuingThere is also a very large elephant in the room Inflation could prevent central banks and governments from once again showering economies with stimulus money if additional lockdowns ensue Additionally shutdowns could exacerbate our already significant supply chain problems further boosting inflationHowever among the many heartaches and challenges of the past two years there have been many bright spots as well Perhaps the most noteworthy has been the resilience of the American spirit The courage of our essential workers in the face of physical danger the creativity of business owners in the face of possible failure and most importantly our faith that the country will prevail as it always has in the face of hardship and difficulty This spirit should carry us well into the future with hope and optimismThis article was originally published in the MarApr issue of TFMC Robin Szabo is president of Szabo Associates Inc media collection professionals in Atlanta GA He can be contacted at robinszabocom or 404 2662464Click the social buttons to share this story with colleagues and friendsThe opinions expressed here are the author39s views and do not necessarily represent the views of MediaVillagecomMyersBizNet

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