The best way to manage accounts receivable, credit and collections is to have procedures in place which fit your business model and follow them. Most companies have the appropriate procedures in place, but some fail to follow up on the steps in the procedures. Follow up requires organization, discipline and time. Failure to follow up is usually due to shortcomings in all three requirements. Better management of follow ups can be achieved by reviewing your procedures, adequate training and use of the tools available in an automated accounts receivable, credit and collection system.
REVIEW PROCEDURES
When was the last time you reviewed your accounts receivable, credit and collections procedures to make sure that they are up to date for your business model? Are all of the steps in the procedures really necessary? Procedures which are not being followed can be the reason for accounts receivable problems, or they may simply not be necessary or useful anymore. Make a list of your procedures and ask yourself critical questions about them as in the following examples.
- Credit limits: Are all of the requirements for setting credit limits really necessary?
- Collection calls: How many do you require before deciding that a demand letter should be sent?
- Demand letters: How many are you sending before you decide an account is uncollectable?
- Collection agency: How long do you wait before sending an account to collection?
After your review, adjust your requirements and see if follow ups and Key Performance Indicators (KPI) improve over time.
ADEQUATE TRAINING
Most companies do some training of new employees, but often they are left to figure it out for themselves or rely on their co-workers to show them what to do. With the demands placed on employees today, this is not a good substitute for training. Current employees need training also to make sure that they understand what is required of them and are up to date on new procedures and techniques.
It is always a good idea to have written procedures, tutorials and/or videos available to assist with training and provide a reference source for new and current employees.
When it comes to training, there is rarely enough. Do it again and again on a regular basis. The result over time should be improved follow up and KPI’s.
AUTOMATED TOOLS
Automated accounts receivable, credit and collection systems have a number of tools which can be used to make follow ups easier and more efficient.
- Automated reminders: Reminders can be set to alert you when action is required and to send copies of invoices, statements, past due notices and collection letters.
- Online notes: Notes can be kept online for easy reference when doing follow ups.
- Work flow: Copies of documents can be sent and tracked easier with work flow making follow up easier and more efficient.
Automated tools, periodic reviews of procedures and training can help to achieve the proper level of accounts receivable follow ups and improve KPI’s.
Automated accounts receivable, credit and collection software is available from Lockstep Collect, the leader in cloud-based software solutions made specifically for businesses selling on credit terms.
If you would like to learn how you can automate your accounts receivable, credit and collection system, please contact Lockstep Collect at www.lockstep.io.