A successful collection effort is an important component of any business. It plays a major role in the revenue cycle; not only do you have to close the sale and provide the product or service, but no transaction is complete until payment is collected. The ability to collect in full and in a timely manner can result in significant savings and increased profitability. The basis of an effective collection strategy lies in complete documentation and persistent follow up.
- Complete documentation begins with proper billing procedures. Invoices should always be prompt, accurate, and in accordance with customer specifications. Basic elements of an invoice include remittance instructions, a detailed list of goods sold or services provided, terms of sale, amount due, and any purchase order reference numbers in accordance with customer requirements. By ensuring a complete and accurate invoice, you eliminate the opportunity for unnecessary delays.
- Regular client statements, typically provided on a monthly basis, compliment proper billing procedures by providing a complete list of all open invoices, the due date, amount, and any reference information. Statements should not be confused with the invoice as many customers will not pay from a statement alone and require the actual invoice to process payment. Client statements serve as a check and balance, reminding the client that you show these invoices as unpaid, initiating action if there is a dispute, and keeping the communication lines open by keeping all parties informed and up to date.
- Persistent follow up via phone is also very important. However, managing the balance between customer relations and collections is often a difficult challenge. The follow up call should be prompt, courteous, brief, and effective in obtaining specific payment information. The objective is to reach a win-win solution that results in timely receipt of payments while maintaining the relationship.
Effective collection procedures should be part of the total Receivable Management Strategy. Capital Plus is a financial services provider helping clients via accounts receivable management and financing. For more information, please reach out directly.
Vice President of Sales
Capital Plus, a division of United Capital Funding Group, LLC.