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5 Accounts Receivable Collection Mistakes You Should Avoid
November 21, 2024
- Have a plan and start early – small businesses tend to send reminders too late, when the account is severely past due or if they are in immediate need for cash. In the long term this is not a good business practice. Having a collections policy for the business will help you keep yourself and your clients in check. Having a defined plan will help you to act systematically in order to get paid in full for your service. Today’s best practice is receivable reminder automation.
- Keep it short – try to limit yourself to one page + invoice/ 1 screen +file attachment. In today’s world, no one wants or can read very long communications. 99% of the time you can state everything in a short message.
- Know when to cut your losses – You must determine at what point (time or amount wise) you are cutting off further services to the delinquent client. And, when are you passing the case to the collections agency.
- Have only the necessary details – Many businesses are emotional or add remarks and irrelevant information to their letters. This diverts their client’s attention from the most important thing – paying your invoice ASAP. Keep it simple and have everything needed for your client to pay you (like amount, invoice reference #, your details and why this should be paid.
- Be factual – stick to what you know to be true. The contract was signed at X date for Y amount and Z payment is overdue for so and so days. Everytime you get caught not having your facts right, payments will get delayed, while you and your client argue. Thus, it will be beneficial for your bottom line to have everything on file in order to timely get paid.
- Be polite – don’t give any excuses for non-payment. Or, lose further business or your good reputation because of angry, unprofessional payment reminder.
- Make sure to provide all the necessary details for contact and payment – make sure that your message contains your details (so your client would know who is reminding them about payment and how to contact you if there are any questions).
- Have supporting documentation – if there was a contract, purchase order, or order form signed by your client, it is best to have it on hand in case client tried to dispute payment terms, amount or payment milestones. CRM log is better than nothing.
- Make sure to have reminder log, proof or record – this will help you to be factual if client disputes receiving any prior reminders or being invoiced at all.
- Have convenient payment options – having multiple payment options available will help your clients to settle past due accounts faster and easier. Imagine that you have a foreign client that cannot make ACH payment – in this case having an option to receive credit card payment is handy. On the other side, some clients, and businesses especially, don’t necessarily have a credit or debit card. It is best to provide them with your account details for a wire. PayPal is also a very elegant solution to have. Relying only on receiving checks in the mail will impair your cash-flow in the long term, and will cost you a lot of time in depositing said checks.
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