Developing Killer AR Email Templates, Collection Letters, and Scripts: Introduction
Managing your accounts receivable is overwhelming for many businesses, but it can be very easy if you have the right tools to help you and your staff. This article outlines some of the basics that you’ll need to craft an accounts receivable credit and collections strategy to meet your specific business needs.
This document provides everything that you need to consider before you start building out accounts receivable email templates, collection letter templates, and collection call scripts. Sample templates, documents, and scripts are provided at the end of this document for examples to get you started.
The first section of this document outlines six steps to developing an effective credit and collections plan that will drive-down your accounts receivable and bad debt write-offs. It is highly recommended that you complete at least the first five steps before you begin using any of the AR email templates, collection letters, or sample phone call scripts, as these steps will have a dramatic impact on your success or failure.
STEP ONE: RESEARCH
Before you begin, you should first conduct a little research to understand where you’re at today. We recommend that you spend at least a day doing some basic research, but it’s better to spend much more time if you want to be even more successful.
WHO ARE YOU?
The first thing you need to define in your research is who you are. This seems like a straight-forward question, but many businesses start out serving a particular segment of the market, and their business changes, so they don’t have a clear understanding of who they have become over time. Some questions to ask yourself include:
Do you serve business customers, consumers or both? What percentage of customers fall into each of these categories? What percentage of credit and collections problems fall into each of
these categories?
How do you define your business? Are you in the construction industry? A distributor or manufacturer? Do you provide consulting or business services? Or are you involved in another industry? This is critical for you to understand as there are many industry-specific issues surrounding accounts receivable depending on your particular industry. For example, construction companies may need to manage mechanics liens for non-payment, and transportation companies need specific information regarding deliveries and freight bills to effectively manage the credit and collections process. Note that your business can be defined by more than one industry. This is very common, as a manufacturer may also act as a distributor in certain product lines and could also provide business services for the products they manufacture and distribute. It’s important to understand what invoices and accounts are represented in each of your defined industry segments before you start crafting a credit and collections plan, since strategies that work in some industries will not be as effective in others.
Do you serve small, medium or large businesses? What is the distribution of these customer sizes across your business customer base? Strategies that work for small companies may be less effective than strategies you implement for larger business companies.
There may be other ways to get a clearer picture of your customers. For example, your business customers could fall into one of three categories – commercial, government and industrial. Each of these three types of customers may have specific needs that should be addressed in your credit and collections strategies. Spend some time understanding the types of businesses you serve and what percentage of collection issues are related to each segment.
WHAT ARE YOUR PROBLEMS?
You can focus on identifying the major problems with your current credit and collections processes once you understand who you are and who your customer are. We suggest that you try to identify the top three issues facing your credit and collections today, and then return to this list periodically to improve other areas. Below is a summary of the top five credit and collections issues facing businesses that we’ve uncovered through the years. You can use this list or create your own list, but either way you need to understand what’s working and what’s not working so you can fix it.
Most customers want to pay you on time, but they won’t if there are problems with the invoice. Find out why customers aren’t paying you on time. Are your invoices missing the customer purchase order? Are they being sent to the wrong person or the wrong address? Is the billable rate or freight rate wrong? Are they tax exempt, and you continue to charge tax? Review all late invoices, talk to your customers and your accounts receivable staff, and identify what’s wrong. Later we will discuss how to fix these issues and ensure invoice accuracy to avoid late payments, but it will be very apparent to you how to resolve many of the issues with small changes in your billing processes.
Are your customers receiving the invoices? Are they receiving them early enough to pay you on time? Many companies only process invoices once or twice a month. If the invoice is created on the first of the month with Net 30 terms, and you don’t send the invoice to the customer until the 15th of the month, you’re only giving the customer 15 days notice to make a payment on time. Consider processing invoices more frequently and sending invoices to customers electronically so they have more time to review and to pay the invoices before the due date.
Most businesses do not have a formalized credit and collections process. As such, they are working with outdated Excel spreadsheets, old Aging Reports, or they enter information manually into a CRM system to keep track of what they’ve done or what they need to do. Inaccurate and outdated information is not effective to helping you get paid on time. Understand what information is important to your credit and collections staff. Later we will discuss how to utilize a credit and collections management software application and help you get access to this information in a centralized system designed to make you much more effective in your activities and customer communications.
Do you have enough people working on accounts receivable? Do they have the proper training and access to information to be effective? Do they have systems to help them streamline their processes? Accounts receivable is likely your largest or second largest asset. Make sure that your team has everything they need to be as effective and as efficient as possible, so you can get paid on-time, every time. Identify your team members, roles and responsibilities, and solicit their feedback as they will be able to tell you what they need, what’s working well, and areas where they feel your business could dramatically improve.
YOUR RESULTS
Now that you’ve done a little research, you should have a handle on who you are, who your customers are, and what types of problems you’re facing, but what are the end results? How long is it taking your customers to pay you? What’s the financial impact of late payments on your cash flow? What are the associated financing costs for that cash? How much do you write-off annually in bad debt?
Most companies (on average) extend Net 28-30 day terms to their business customers but get paid an average of 61 days after the invoice due date. This is a good benchmark if you want to be average. Best in class companies get paid a minimum of 20% faster or 48 days after the invoice due date. There is a lot of room for improvement here and many companies we’ve worked with have improved this number, significantly getting paid on-time or shortly after the due date by simply implementing some very basic strategies which we’ll share later in this paper.
How much do you spend manually processing invoices, and how much could you save by implementing an electronic invoice delivery system and customer self-service payment portal where your customers could pay you online? Consider that it takes at least 2 minutes to process a single invoice (printing, folding, putting it in an envelope, and affixing postage). Also consider that the cost of the paper, toner, envelope and postage is at least 50 cents per invoice. If you’re paying someone $10 an hour, your costs to process invoices can add up to a significant amount in no time.
Keep in mind that benchmarking your company to others will depend greatly on your industry, your company size, and other factors. A great resource for benchmarking your accounts receivable against your peers (same industry and company size) is the Credit Research Foundation. The CRF provides a low cost report to help you understand exactly how you compare to your peers. You may qualify for a free copy of this report by participating in the survey. More information is available here.
STEP TWO: SET GOALS
Too often we see businesses that are focused on the cash aspect of their credit and collections. While cash is important, it’s simply the result of effectively managing your accounts receivable credit and collections process. As such, your goals should not be based on cash improvements, but rather on improvements in your invoicing and customer communications plan. If you set the right goals and you attain them, the cash will come.
So what should your AR and collection goals be? This will depend somewhat on your research and your particular business needs, but some examples of goals are provided below to help you understand what is possible. No matter what goals you set, each should be measurable so you know if you’re reaching your goals or if there are other things you will need to do in order to attain the results you’ve set for your business.
IDENTIFY INVOICE PROBLEMS EARLIER
One of the best goals you can set is to identify invoice problems earlier in the process. If the invoice is incorrect, missing a customer purchase order number, or sent to
the wrong person or address, you are unlikely to get paid on time. An easy goal to set would be to have someone review all invoices that are past due to ensure that they are correct.
Set this as an internal policy and the first step taken in your credit and collections process. You may even want to break this down further so that large dollar invoices are reviewed before they are sent to customers. After all, large invoices represent the bulk of your cash and the highest financial risk should the customer refuse payment due to invoice problems. Large dollar invoices will vary by business and should be clearly defined by your executive team.
SEND THE INVOICE SOONER
If you don’t already know how long it takes you to send invoices to customers, take the time to figure this out. Once you do, set a goal to break your average time and get invoices to customers sooner. This will be the result of processing invoices more frequently (every day or week compared to once or twice a month) and by implementing an electronic invoice system to send invoices to customers electronically via email, fax, or electronic data interchange (EDI). The customer has to have the invoice as soon as possible in order for them to pay you on time. There’s no excuse for late invoice delivery with today’s technology options. In an ideal scenario, the customer should receive the invoice the day that it’s processed but even small businesses should be able to send invoices at least once a week giving the customer enough time to process payment before the invoice due date.
REMIND CUSTOMERS TO PAY
Very few companies have time to remind their customers to pay their bills, but this is a great goal to set. If you don’t have a credit and collection management system you may want to focus reminders on larger invoices. You should remind customers that they have invoices that will be due in the next 3-5 business days that still have an outstanding balance. In most cases, a simple reminder is all you need in order to get paid faster. Your goal should be to remind every customer to pay when they have bills that will be due in the near future. Adjust this goal to meet your specific needs.
GET PAID FASTER
The overall goal for your entire credit and collections process is to get paid faster. Based on your research, you should understand how long your customers are taking to pay you. You can now set a reasonable goal to get payment faster. For example, if you’re like most businesses, your customers are taking you 60 days to pay on a NET 28 invoice. By implementing even modest systems and procedures you should be able to improve this by 20%, getting paid 12 days faster. This makes sense when you consider the first three goals – ensure the invoice is correct, ensure they receive the invoice with enough time to pay you by the due date, and remind them to pay before they’re past due.
FINANCIAL RESULTS
While you shouldn’t set financial goals, it is important to understand how your goals impact your financial results. What
does it mean when you get paid 12 days faster? It means that you’re reducing financing costs for borrowing cash when you have cash flow problems. Let’s look at an example:
For every $1 million in credit sales the average business has about $166,680 in current and outstanding accounts receivable, meaning that you’re getting paid in 60 days (Days Sales
Outstanding). If the cost to borrow cash from your financial institution is 10% APR, then financing costs are $16,668 annually. By getting paid 12 days faster, you’re avoiding about $3,334 in financing costs annually.
Most businesses write-off 4% of accounts receivable. You should easily be able to reduce bad debt write-offs by 20% by simply identifying invoice problems earlier, getting the invoice to customers sooner, and reminding customers to pay. Again, assuming $1 million in annual credit sales, this means that you’re writing off $40,000 annually with a 20% improvement, saving you $8,000 every year.
Keep in mind that financial results in the previous example are based on a business selling $1 million annually on credit terms. The financial impact to your business will be much greater if your business is doing $10 million, $100 million, or more.
Of course there are other financial goals that can be set but these are just two examples. You may also want to reduce invoice processing costs as discussed previously. Maybe you can’t implement electronic invoicing for all of your customers but cost savings for just half of your customers could be significant.
STEP THREE: YOUR TEAM
You assign resources to sales, marketing, preventative maintenance, customer service, and virtually every aspect of your business, but who is responsible for managing your accounts receivable? In most businesses, it’s a part-time, untrained bookkeeper or junior accounts receivable clerk. Considering that accounts receivable is such as vital part of your cash flow – does this sound appropriate? Probably not.
The next step to improve your accounts receivable credit and collections is to define your credit and collections team.
RESOURCES
Depending on the size of your company, you will have various resources to manage your accounts receivable. Smaller businesses may have a single, part-time employee, while larger companies will have several levels of credit managers, collectors, and other resources involved in various aspects of the credit and collections process.
It is safe to estimate that most companies should staff at least one full time credit professional for every 1,000 invoices created each month (or at least one part-time employee for 500 monthly invoices) – especially if they are not using software for invoice delivery or collections automation. The same principle holds true if they are managing 500 to 1,000 active customers per month, assuming that each customer has 1-2 open invoices each. More information on sizing your credit and collections team is provided in our blog article How Account & Invoice Volume Effect Accounts Receivable Management.
ROLES & TRAINING
You should also define which available resources have authority to manage various aspects of your accounts receivable, credit and collections policies, and procedures. Who can put a customer on credit hold? Who determines customer credit limits? Who negotiates payment plans? Who makes the first phone call? You should also ensure that resources have the proper training to be effective in their jobs. You cannot expect a young accounts receivable clerk to know how to make collection calls if he or she has never had training and doesn’t feel comfortable talking on the phone. Keep this in mind as training is as important as selecting the right resources for your team. More information on training options and identifying roles and responsibilities can be found in our 6 Steps To Creating A Business Credit Policy and Collections Action Plan white paper.
STEP FOUR: DEFINE PROCEDURES
By now you should have a solid understanding of what you’re doing right and what you’re doing wrong, your goals for improving credit collections, and who’s
responsible for managing the process. Now it’s time to talk about strategies that, beyond reminders, that will help you get paid faster than you ever imagined.
As mentioned previously, your business is unique based on your industry and the types of customers you serve. Therefore, your credit and collections procedures will also be unique to your company. In fact, we’ve found that most businesses should not treat every customer the same because every customer is NOT the same.
That’s why we recommend setting up customers into different credit classes – each with its own unique workflow and different steps in the collections process. For example, you don’t want to send a threatening collection letter to a well-established, strategic customer, but you probably should if you’re dealing with a newer account that is less established and has already broken several promises to pay you on time. Likewise, your government customers may tend to pay later than your commercial customers, so you may need a separate workflow to manage those accounts.
Your policies and procedures will vary greatly between customer classes. Below are some suggested business to business credit and collections procedures that you may want to consider for three types of customers – Strategic Accounts, Established Accounts, and New Accounts.
Keep in mind that for most businesses, strategic accounts represent less than 5% of their business customers, established accounts likely represent the largest portion of their customer base (upwards of 80%), and newer accounts make up the remaining base with the highest potential risk.
DISPUTES
The first thing you want your collectors working on are invoice disputes, and they should start with the largest ones first. Any invoice that is in dispute means that you’re not getting paid until you resolve the dispute.
Segregate disputed invoices and use reason codes to understand why the invoice is in dispute. Is the customer claiming they already paid the bill? Are they disputing the information on the invoice – products or services billed, freight charges, missing purchase order information, sent to wrong person or address, incorrect product received, product damaged, etc. Isolate invoice disputes, set a policy for managing them, and track dispute reasons so you can implement new policies and procedures to prevent them from happening again.
The earlier you identify the dispute, the faster you can resolve the issue and the faster you’ll get paid. Credit and collections systems allow you to manage disputes, or you may want to manage these in a special list which is available for multiple members of your team – a hot issues list that requires team collaboration in order to resolve the issue before it escalates too far.
NEW CUSTOMERS
You should have a clear process for managing new customers. Do you require a credit application? How do you determine credit limits and credit terms? And who is responsible for contacting the new customer to explain your credit policies? Someone in your business should be responsible for maintaining your relationship with your customers – especially new and strategic customers.
You need to understand their internal procedures and who to contact when things go wrong. Some companies require proof of delivery before they pay. Others require that invoices be sent a week or two before they are processed for payment. Spend time in this area, and you’ll uncover dozens of areas where you can improve your processes while building healthy and mutually-beneficial relationships with your customers, which will improve customer retention, customer satisfaction, and potentially increased sales. After all, a bad credit experience is likely to drive away customers while a great credit experience will motivate them to do more business with you instead of your competition.
LARGE INVOICES
As mentioned previously in this series, you need to establish a policy and procedures for managing large dollar invoices as these have the greatest risk and the greatest reward for your business. Understand who will manage the large invoices and when to start collection calls. We suggest that large dollar invoices be called much earlier in the process and more frequently to ensure that everything is correct, that the customer received the invoice on time, and the customer is willing and able to pay you.
REMINDER EMAILS
You should remind customers to pay you a few days before the invoice is due and that there is still a balance due on their account. You may want to wait until the due date for strategic
customers but you may want to remind newer customers 3-5 days before the invoice due date. Reminder emails take a lot of time if you don’t have the right system in place to automate this
process.
Consider implementing a credit and collections system to assist in these communications or off-load the responsibility to an office manager, secretary, or other entry-level resource that has
available time to send the reminders. Reminders should be friendly in nature and should reference the invoice or invoices with information about the balance due with instructions on how to make a payment. You should also resend the original invoice along with the reminder just in case they can’t locate the original invoice.
PAST DUE EMAILS
A past due invoice should be managed carefully. According to our research, you are likely to collect only 74% of invoices that age to three months; 30% of invoices that age to 6 months; and only 10% of invoices that age to 12 months. It is easy to send a past due notice to customers that have past due invoices. This email notification should be sent the day the invoice is past due, or within a few days of the invoice due date. It can be friendly in tone and like the reminder email, should include a copy of the invoice with the information the customer will need to remedy the situation.
COLLECTION CALLS
Your first collection call will occur within two weeks after the invoice due date. The call should be friendly in tone with the goal to understand why the invoice has not been paid. In most cases, you will find that there is a problem with the invoice or that the customer never received the invoice. You can then remedy the situation and set a follow-up to ensure that the customer has no valid reason to delay payment.
A second phone call should be made within the first 3-4 weeks after the invoice due date. At this point in time the customer should have received three emails – a reminder, a past due notice, and a collections email as well as a first phone call. The second phone call acts as a follow-up on the collections email providing the collector with an opportunity to address the problem directly with the customer. Again, the tone of the communication can be friendly but should convey to the customer that the issue is serious and needs to be rectified to avoid future consequences for non-payment.
A third collection call should be made about 30 days after the invoice due date. At this point in time the account is seriously past due and the customer is facing much more severe consequences for nonpayment. The call can be friendly in nature but should convey a much more serious tone with more details about consequences and timelines, should the issue continue to go unresolved. Consequences may include putting the customer account on hold, ceasing all product shipments or services, and possibly more severe actions such as reporting the customer to credit bureaus, turning accounts over to third party collections, or legal actions.
The fourth, and final phone call, will be made by a senior level executive around 40 to 50 days past due. It is provided to give the customer one last chance to make a payment. At this point you should ask directly for a wire transfer, ACH bank transaction, or credit card to rectify the situation. Failure to pay in the next 5 days will result in the account being turned over to third party collections, a report filed with credit bureaus, and possible legal action. There is no friendly tone in this communication. The issue will be handled professionally but it is a serious matter with serious consequences.
SALES NOTIFICATION
You may need to involve the sales department if invoices continue to go unpaid. We suggest notifying the customer’s sales rep of the issue when the invoice is 3-4 weeks past due. Consider that the sales rep probably has the best relationship with the customer and they likely have a financial incentive to resolve the issue so they can get their commission on the initial sale and they can continue to sell more to the customer in the future. The sales rep should be in contact with your customers more than your credit and collections team and can act as a resource to resolve more serious invoice disputes since they may have more information about the products or services provided to the customer on the initial order.
CERTIFIED POSTAL
By now the situation has become very serious, and there is a high probability that you will be faced with difficult decisions to take legal action or to terminate a customer account. The issue should now be escalated to a senior level executive with authority to work with the customer on a payment plan or to rectify more severe invoice disputes.
The next step in the process should involve the creation of a letter from your executive team to the primary contact’s immediate supervisor, CFO, Controller, or President, highlighting what has been done to remedy the situation and the serious nature of the issue at hand. This letter should be sent when the invoice is 30-40 days past due via certified mail with a corresponding email copy sent to all of the contacts where email addresses are available.
You may want to send a second letter via certified mail and another email to all customer contacts when the invoice is 40-50 days past due. This will be the final communication with the customer notifying them that you will be seeking legal action and turning their account over to collections if payment is not received in 5 days.
THIRD PARTY COLLECTIONS
You’ve emailed the customer 5 times and you’ve called them 4 times. The issue is still unresolved and you now pursue the only options left to resolve the issue. Depending on the size of the invoice, you may want to turn the account over to a professional, third party collections firm, sell off the invoice to a factoring company to recoup a small portion of the balance due; or seek legal action which will be costly and time consuming. Final actions should occur between 45-60 days past due as a last resort, understanding that it is unlikely that you will ever do business with this customer again.
STEP FIVE: AUTOMATION
You’ve done your research, you’ve set goals, you hired and trained the right people, and you’ve defined your credit and collections processes, policies, and procedures. The next step is to put all of this into a system so that it’s manageable. This means using technology to streamline the process.
Most companies couldn’t afford a credit and collections management system just a few years ago. With costs starting at $15,000 per user and implementations costing just about as much, technology was simply out of reach for most businesses despite the huge payback that companies can realize by reducing financing costs and bad debt write-offs.
That’s why we developed Lockstep Collect, the first accounts receivable credit and collections management system designed specifically for business to business accounts receivable collections.
Unlike other systems, Lockstep Collect is not designed for collection agencies. It is designed to act as a virtual accounts receivable clerk and credit manager to help you identify what actions need to be taken, when, and how, with built-in templates, automated email communications, and other tools to help you get paid faster.
Below are just a few of the tasks that Lockstep Collect automates:
Mark invoices in dispute with reason codes and escalation to appropriate resources to resolve the disputes.
Setup the system to notify your accounts receivable team when invoices appear to have problems. For example, if a customer requires a purchase order, then setup a rule to alert the collector every time an invoice is created for the customer where the purchase order is blank.
Notify collectors when customers are over their credit limit, on credit hold, and when they have large invoices that require their immediate attention.
Automatically escalate disputes, large invoices, and severely delinquent accounts to credit managers and senior level executives with a complete history of everything that’s occurred with the account, and the historical communications for the invoice in question, so they have all of the information they need to resolve the issue before it gets out of hand.
Use the system to automatically send emails to customers with copies of invoices and predefined templates and letters for each phase of the collection process – reminders, new customer welcome
letters, past due notices, collections emails, certified letters via email, and final notifications.
Collectors waste a lot of time reviewing aging reports, handwritten notes, and emails in their personal inbox before they ever pick up the phone to call the customer. In fact, industry analyst Paystream Advisors suggests that companies that automate systems like Lockstep Collect spend 300% more time soliciting customers for payment because they have all of the information they need to be effective in their communications with a system to guide them through the process. Lockstep Collect will schedule calls for the collector as invoices age so they know exactly who to call, when, and why, with access to information for the first through the fourth and final collections calls.
STEP SIX: MEASURE RESULTS
The final step in defining your accounts receivable and credit collections policies and procedures is measuring the results. In step one and two you did some research to better understand what was working and what wasn’t working, and you set goals to improve several of those areas. Credit and collections is a numbers game, and you can easily measure the results. Now let’s discuss several key performance indicators (KPIs) that you may want to measure along with suggestions to continually improve on your business to business accounts receivable collections so you continue to reduce your bad debt and get paid faster and faster year by year.
AVERAGE DAYS TO PAY
The average days to pay is a good indicator of how well your customers are paying on time. In the Lockstep Collect dashboard, this can be broken down by invoice amount which gives you an idea of whether you struggle to collect from larger or smaller accounts and where you can improve. Before implementing any of the tips we’ve suggested in this white paper, track what your current average days to pay is. After implementing the changes, check again and find out how much you’ve been able to reduce your average days to pay by.
DISPUTES
If you extend credit to customers you will inevitably end up with invoices in dispute. The key is to identify disputes earlier in the process, to define each one with a reason code, and to analyze disputes so you can do a root-cause analysis to prevent them from happening again. To measure your effectiveness you need to first understand how many invoices are in dispute. This can be difficult without a credit and collections system, but ask your collectors, and they should be able to provide a rough estimate. Next, track both the number of invoices in dispute and the value of disputed invoices over time. The goal should be to reduce both numbers as you gain more and more proficiency with your processes and/or your credit and collections system.
COMMUNICATION
How many times do you communicate with customers regarding past due invoices? This is an important metric for you to understand. As mentioned previously, each past due invoice should be emailed and called a minimum of 9-10 times through a standard collections cycle before the account is turned over to third party collections and before you pursue legal action. You can setup simple or advanced metrics to evaluate your communications. It can be as simple as communications per invoice across your entire portfolio of accounts, or it could be very detailed, broken down by invoice aging bucket, by customer type, or other criteria.
Something to consider is collector workload. It takes a minimum of 5 minutes for most people to draft an email and to attach invoices for email-based communications and it takes a minimum of 20 minutes for someone to call a customer, to conduct a phone conversation, resolve an issue, and note what they’ve done. This means that the average person can make just 3 phone calls per hour (assuming they reach a live person each time) OR they can send 12 emails per hour assuming they have access to the accounting system to create PDF copies of invoices.
As such, another metric you should monitor is how much time your collectors are spending on calls and emails and whether they’re able to get through their task list or if there are tasks that they are unable to complete because they simply do not have enough time. Consider evaluating a credit and collection system to automate the mundane and routine email communications while presenting everything they need in a centralized system so they can make more calls and focus on higher priority issues.
Communications metrics should correlate to your overall accounts receivable numbers. The more you communicate with your customers – the lower your accounts receivable. Financial executives including CFOs, controllers, and credit managers will want to know if their collectors are efficient. How many calls and emails are they completing, what are the results, are some collectors more efficient or stronger in certain types of activities, and how can they train and manage their staff to be even more effective?
Lockstep Collect includes a dashboard (below) providing top-line metrics to help you understand all of this – who has your cash, how long is it taking customers to pay you, what’s in dispute, when can you expect to get paid, and much, much more.
CALL SCRIPTS
The following call scripts are provided as examples of what you may want to communicate with the customer during each phase of your credit and collections process. Every business is different and you should tailor these accounts receivable email templates and scripts to meet your needs. Keep in mind that you may need to have several variations of each script or template for different types of customers as well.
INTRODUCTION
YOU:Hello. My name is from the credit department at . I am calling to discuss Invoice that was due on . We are showing a balance past due of
CUSTOMER: Customer explains the reason for non-payment is a dispute with the invoice. See responses below for common disputes below:
YOU:I don’t see a payment in our system for this invoice. Can you help me understand why it has not been paid?CUSTOMER: Customer explains they forgot to pay it, were busy, were on vacation, the person who pays the bills was unavailable or died, or whatever the excuse is but they have the invoice, everything is correct, and there is no reason for continued non-paymentYOU: I understand. That certainly happens to the best of us. Proceed to Closing A below.
YOU: I don’t see a payment in our system. Did you pay via check, online bill pay, or ACH and when did you process the payment?CUSTOMER: Customer explains how they paid and when they paid.YOU: Thank you for this information. It appears that the payment hasn’t been recorded in our system so I’m going to set a follow-up date in a couple days to see if it’s been received and processed. I will contact you if for some reason we still have not received the payment as it would appear that there may be a problem with the payment. Continue to Closing B.
YOU: I apologize for that. Can you verify your email address so I can resend the invoice to you?CUSTOMER: Customer verifies their email. If it is not the same as what you have in Lockstep Collect – correct it. If it’s the same then resend the invoice and keep the customer on the call until they confirm that they have received it. Note that it could be blocked or held in their Spam filter. Ask that they check their spam filter and add your email address to their safe senders list. Customer acknowledges that they have received the email. Proceed below.YOU: That’s great news. Proceed to Closing A below.If they did not receive your email Proceed below.YOU: Is there an alternative email address than I can send the invoices to or can I fax them to you?CUSTOMER: Customer verifies an alternative email address and/or fax number. Send the invoices while you have them on the phone and verify that they received them. If they did receive them then thank them and Proceed to Closing A below. If they still did not receive them then proceed below.YOU: I’m going to mail the invoices to your attention today and will follow-up with you in a few days to ensure that you received them. In the meantime, can you check with your IT department and let me know if there is some reason why you may not be receiving our email communications? Also, can you please verify your mailing address?CUSTOMER: Customer agrees to contact their IT department. Make sure that you followup on this on your next call to ensure that your email domain is not on their black list for some reason and that future email communications are received. Verify that you have the correct mailing address for the customer. If so then mail the invoices and set a follow-up date in Lockstep Collect. If the address is incorrect then send a note to accounting to change the address and mail the invoice to the correct address. Proceed to Closing A below.
YOU: I apologize. This appears to be a mistake on our part. Can you help me identify the purchase order number for the invoice so we can get that fixed and resend the invoice?CUSTOMER: Customer gives you the purchase order numberYOU: Thank you very much. I’ve made the change to the purchase order and I changed the setting on your account so that future invoices will require the Purchase Order number so we can avoid this issue in the future. I am resending the invoices now. Continue to Closing A below.
YOU: I apologize. Can you help me understand what should have been reflected on the invoice?CUSTOMER: Customer explains what was wrong.YOU: Is the dispute is valid or invalid? If you do not know then tell the customer that you will have to do some research on this issue and ask them when a good time would be for you to follow-up with them. Create a follow-up activity on the communication screen within Lockstep Collect for this date and time. Continue to Closing B below.
YOU: I see that this was an error on our part. I will correct this immediately and will resend the revised invoice.Mark the credit issue as resolved in Lockstep Collect. If they were disputing only a portion of the invoice, put in the amount that was in dispute. Make sure that you mark the dispute reason code. Since this was a valid dispute, check the Exclude from Aging check-box so that the disputed amount does not trigger Lockstep Collect to create new actions for you. Proceed to the Closing A below.
YOU: I’m sorry but it appears that the invoice is correct based on information. I will contact the sales department to clarify the information we have. Can you provide some more information to help us understand why you feel the invoice is incorrect? If this is an error on our part then we will correct the issue but it appears that everything is accurate based on our notes. When would be a good time for us to connect again to discuss this matter further?Do not mark the credit issue as resolved in Lockstep Collect. If they were disputing only a portion of the invoice, put in the amount that was in dispute. Since this was an invalid dispute, DO NOT check the Exclude from Aging checkbox so the invoice continues to trigger Lockstep Collect to create new actions for you. Proceed to the Closing B below.
YOU: Check the accounting system to identify the shipment status. If the shipment as not sent then apologize and tell the customer that you will investigate the situation and will let them know when the shipment will be made. If the shipment was sent but in the past few days, notify the customer that they should receive the product in the next few days. If the shipment should have been received by now then provide the shipment information to the customer and tell them you’ll follow-up to track the shipment and will notify them of the reason for the delay. Proceed to Closing B.
YOU: Can you clarify the problem with the shipment? I need to understand if the product was damaged, what product you expected, and what quantity you ordered.CUSTOMER: Customer explains the issue.YOU: I’m going to research this issue further. It seems as though there may have been a miscommunication during the sales process or an error on our part. I will contact the sales department to get more information. When would be a good time for us to follow-up for a status update on this order?If the product is damaged – ask them to send pictures via email. If it was the wrong product or wrong quantity then find out what they expected and crossreference to the sales order and involve sales if needed.CUSTOMER: Customer provides date/time for follow-up call.Document the results of your call in Lockstep Collect and set a follow-up activity for the date/time with the customer to speak about the issue. Make sure to contact sales to identify the problem.
YOU: I understand that you require back-up documents for payment approval. If I send them to you today, when do you expect that you can approve and process the payment?Send the supporting documents to the contact while you are on the phone with them to ensure they receive them. If you have trouble locating the documents then tell them you will send them after the call.CUSTOMER: Customer explains which documents are missing – e.g., proof of delivery, timesheets, bill of lading, etc. They should also provide an estimated payment date which you can enter as an Expected Payment in Lockstep Collect.YOU: Proceed to Closing B
CLOSING A (ISSUE RESOLVED)
YOU: Thank you so much for all the help today. It was great speaking with you again and we truly value your business. Can you please help me with one last question? I need to know when we can expect a payment for our internal cash flow projections.
CUSTOMER: Customer provides you with a payment date and amount. Log this into Lockstep Collect as an expected payment with the date and amount expected. You may want to ask if they are confident that the payment will be received by that date. If so then mark the expected payment as a Promise to Pay. If that date comes and goes and you don’t have a payment for that amount, Lockstep Collect will notify you that the customer has broken their promise and you will be alerted to follow-up on the payment again. Enter any additional call notes into Lockstep Collect, mark the issue as resolved, and save the communication as successful
so that you can see that the call successfully resolved the issue.
YOU: Again, thank you for helping me today. I certainly appreciate your attention to this matter. Please let me know if there’s anything else I can do for you. Have a great day. Goodbye.
CLOSING B (ISSUE UNRESOLVED)
YOU:Thank you so much for all the help today. It was great speaking with you again and we truly value your business. As we discussed, I will follow-up with you soon to continue our discussions about this important matter. Please contact me at or if you have any more information or questions about this issue. We will be in touch soon. Take care and have a great day.
Enter your call notes into Lockstep Collect, make sure that you set a follow-up date for the next call, leave the issue as unresolved, and save the communication as successful since you were able to discuss the matter with the customer.
NEW CUSTOMER WELCOME CALLS
YOU: Hello. My name is from the credit department at . I am calling to introduce myself and to review Invoice which appears to be the first invoice that we’ve sent to your organization. We find that invoice issues typically occur on the first invoice so we want to review the invoice with you to ensure that everything is correct. Did you receive the invoice?
CUSTOMER: If they received the invoice then continue below. If they did not receive the invoice then ask for their email and resend it while you have them on the phone and continue below when they confirm that they received the invoice.
YOU: Great. Let’s review the invoice together. I just have a few questions for you.
- Is your address correct on the invoice?
- Does your company require a Purchase Order number on invoices? If so, is the
Purchase Order number on this invoice correct? - Is the invoice easy for you to understand or are there areas that you have
questions? We are always looking for ways to make it easier for customers to
understand our invoices. - Are the product or service and quantities correct?
- Do you see any other problems or issues with the invoice that would delay
payment?
CUSTOMER: Customer will typically have no issues with the invoice but if they do, make sure that you document these, correct them, and resend the invoice. Find out if this is an internal
issue that can be resolved. E.g., flag the customer as Requiring a PO on the Invoice or change the billable rate if it was wrong, etc.
YOU: Thank you very much for this information. I see here that we’ve established a credit limit of for your company with credit terms of . Will this be sufficient for your needs?
CUSTOMER: Customer will typically say yes but if they want to make changes to credit limit or terms you may want to document this and handle this yourself if you have the authority or tell
the customer that you will have a manager contact them to discuss changes to their account.
YOU: Great! Is there anyone else in your company that we should communicate with regarding invoices? Many of our customers want us to provide a copy of the invoice to a buyer or purchasing agent and some want copies sent to either a subsidiary or their corporate parent. We like to have at least two contacts in our system for AP to ensure that we are communicating effectively with your company.
CUSTOMER: Customer provides additional information regarding contacts. Try to get the name of their supervisor, the controller, and CFO if possible.
YOU: Thanks! In order to serve you better, can you confirm if there are days or times of the week that are better for us to contact you or specific days and times that are less convenient?
CUSTOMER: The purpose of this question is to identify if the AP contact only works part-time or if they have standing meetings or obligations where you will be less likely to reach them via phone. Document anything you find in the customer notes in Lockstep Collect.
YOU: We’re almost done. I am going to send you a copy of our credit policy which explains our credit terms in more detail. We ask all new customers to review this document to ensure that we are all on the same page.
We simply ask that you pay on time and notify us of any issues or delays in payment. Our goal is to provide you with great products and services and we understand that communication is critical to providing you with the best possible experience whether it’s during the sales process or after the sale as part of the billing and payment process.
Your credit terms are which means that invoices need to be paid of days from the invoice date. The invoice due date is clearly marked on our invoices. We ask that you contact us as soon as possible regarding any issues with invoices or if you will not be able to make a payment by the due date for any reason. We send reminder emails to customers if an invoice has a balance due and will be due in the next of days. You will receive a past due notice of days after the due date for invoices that continue to have an open balance due. I will contact you of days after the invoice due date if we still have not received a payment to
ensure that everything is correct. Do you have any questions regarding this process?
CUSTOMER: Customer will typically agree to the credit terms and policy as explained but if they have questions or concerns you need to resolve them before they become future issues. If
the customer has too many questions or concerns that you cannot address then schedule a call with your manager to review the policy with the customer.
YOU: It was great talking to you today. I look forward to getting to know you better. We’ll be in touch soon. Please feel free to contact me if there’s any way that I can help you in the future. Take care. Goodbye.
LARGE INVOICE CALL
YOU: Hello. This is from the credit department at . I am calling to discuss Invoice . The invoice will be due on . I’m calling to make sure that you received the invoice and if there are any problems with it since it’s a larger invoice than normal?
CUSTOMER: In most cases the customer will have the invoice and it won’t have problems. If this is the case then Continue to Closing below. If there is an issue with the invoice then refer to the Invoice Dispute Call Script.
YOU: That’s great news. Can you help me with my cash forecast? I am required to let our management team know when they can expect payment on larger transactions such as this one. I just need to know what date we can expect payment.
CUSTOMER: Customer will provide an estimated payment date. Document this as an expected payment in Lockstep Collect.
YOU: Thank you so much for the help today. Please let me know if there’s any way I can help you further. I’ll talk to you soon. Have a great day. Goodbye.
FIRST CALL
YOU: Hello. This is from the credit department at . I am calling to discuss Invoice . The invoice was due on but we haven’t received payment yet. Can you confirm if you’ve received the invoice and if so, if there are any issues that are preventing you from processing a payment?
CUSTOMER: In most cases the customer has the invoice and there are no reasons why they shouldn’t have paid it. If this is the case then Continue to Closing below. If they didn’t receive the invoice or there is an issue with the invoice then refer to the Invoice Dispute Call Script.
YOU: I’m glad to hear that. Can you help me with my cash forecast? I am required to let our management team know when they can expect payment on past due invoices such as this one. I just need to know what date we can expect payment.
CUSTOMER: Customer will provide an estimated payment date. Document this as an expected payment in Lockstep Collect.
YOU: Thank you so much for the help today. Please let me know if there’s any way I can help you further. I’ll talk to you soon. Have a great day. Goodbye.
SECOND CALL
Review call history in Lockstep Collect for the invoice in question before making this call. A second phone call happens only after the customer has been contacted once by phone and several times via email with a reminder and a past due notice. If you had a call with them previously then you will handle this call differently than if you were unable to contact them the first time.
YOU: Hello. This is from the credit department at . I am calling to discuss Invoice . The invoice was due on but we haven’t received payment yet. We need to resolve this issue to assure that it doesn’t have a negative impact on our business relationship going forward.
If First Call Was Successful: I reviewed the notes in our system and I see that we talked about this invoice on and there were no remaining issues for non-payment. Can you help me understand why we haven’t received a payment?
CUSTOMER: Customer will explain why payment hasn’t been processed. This could be due to a dispute in which case you can refer to the Invoice Dispute call script. If there is no reason for nonpayment and the customer says they will pay you – then proceed to the Closing below.
If First Call Was Not Successful: I left you a message regarding this issue on . This matter is becoming increasingly important. Can you help me understand why the invoice hasn’t been paid?
CUSTOMER:Customer will explain why payment hasn’t been processed. This could be due to a dispute in which case you can refer to the Invoice Dispute call script. If there is no reason for nonpayment and the customer says they will pay you – then proceed to the Closing below.
YOU: I’m responsible for managing our cash flow projections. Can you tell me when we can expect payment on this past due invoice? I just need to know what date we can expect payment. I also need to know if you are able to commit to this promise date.
CUSTOMER: Customer will typically provide a payment date and most won’t have a problem providing a commit date for payment. Document this as an expected payment in Lockstep Collect and mark it as a Promise To Pay. If the date comes and goes and you don’t have a payment for the amount – Lockstep Collect will create a new action for you to follow-up on the broken promise and it will identify the Broken Promise for analysis and reporting purposes. Continue below.
YOU: Thank you again for your assistance. Please let me know if there’s any way I can help you further. I’ve notified our accounting department to watch for your payment. Take care and have a great day. Goodbye.
THIRD CALL
Review call history in Lockstep Collect for the invoice in question before making this call. A third phone call happens only after the customer has been contacted twice by phone and several times via email with a reminder, a past due notice, and a collections letter. If you had a call with them previously then you will handle this call differently than if you were invoice is about 30 Days Past Due and the likelihood of getting paid in full is diminishing.
YOU: Hello. This is from the credit department at . I am calling to discuss Invoice due on . The invoice is now seriously past due.
If Previous Calls Were Successful: I reviewed the notes in our system and I see that we talked about this invoice on and there were no remaining issues for non-payment. Can you help me understand why we haven’t received a payment?
CUSTOMER: Customer will explain why payment hasn’t been processed. This could be due to a dispute in which case you can refer to the Invoice Dispute call script. If there is no reason for nonpayment and the customer says they will pay you – then proceed to the Closing below.
If Previous Calls Were Not Successful: I left you two messages regarding this issue on and . This matter is becoming increasingly important and we need to resolve this matter to ensure that we can continue providing quality products and services for . If we cannot resolve this issue then it could lead to a disruption in your services. Can you help me understand why the invoice hasn’t been paid?
CUSTOMER: Customer will explain why payment hasn’t been processed. This could be due to a dispute in which case you can refer to the Invoice Dispute call script. Escalate this immediately to
senior management if there is a bigger reason why the customer won’t pay the past due balance. If there is no reason for non-payment and the customer says they will pay you – then proceed to the Closing below.
YOU: We understand that problems arise from time to time. I want to ensure you that we truly value your business. I appreciate your prompt action regarding this serious matter. Cash flow is critical to our business. We need to ensure that we are paid on time so we can continue providing you with quality products and services at competitive prices. I am authorized to accept a credit card payment today if that would be easier for you. Or you can provide me with a check number and payment date which I’ll need to notify our accounting team when to expect payment. Which method of payment do you prefer?
CUSTOMER: Customer may be authorized to pay via corporate credit card. If this is the case and you have authority, process the payment in Lockstep Collect. If the customer says they can’t or won’t pay by credit card then ask for a check number. They will probably not be able to provide this information while they’re on the phone with you. If this is the case then ask them to
commit to sending an email with the check number and a photocopy of the check within the next 1-2 business days. Set a follow-up activity to verify that they have followed through on
this promise. Continue to Closing below.
YOU: Thank you again for your assistance with this urgent matter. I’m directly responsible for managing our cash flow projections and this issue has emerged as a significant matter that our management team expects me to resolve. I assure you that we value your business but we must receive payment on this invoice in the next 5 business days to avoid any disruption in shipments or service for your account. We want to avoid this at all costs. Again, thank you so much for the time today. Take care. Goodbye.
FOURTH CALL
Review call history in Lockstep Collect for the invoice in question before making this call. A fourth and final phone call happens only after the customer has been contacted three times
by phone and several times via email with a reminder, a past due notice, a collections letter, and a copy of a certified letter threatening legal action. The certified letter should have been
received by the customer in the past few days as well. The invoice is now 40 to 50 Days Past Due and the likelihood of getting paid in full is a very critical issue.
NOTE: This call should be made by a senior manager, Controller, CFO, or President/CEO as a last attempt to get paid. You may want to negotiate a partial payment at this time to resolve the issue and part ways with the customer or you may want to discuss other options to preserve your business relationship.
YOU: Hello. This is . I’m the here at . I normally don’t get involved in accounts receivable calls but I need to talk to you about a serious matter regarding Invoice due on . The invoice is related to the following products and services we provided to your company as authorized by . Our accounts receivable staff has contacted several times and we’ve sent several emails and a certified letter trying to resolve this past due issue.
I understand that issues occur from time to time that prevent companies from paying on time but we’ve been ensured that there are no outstanding issues and that payment should have been processed by now. Can you please help me understand what we need to do to resolve this issue? You’ve been a great customer and I personally don’t want this matter to prevent us from continuing our business relationship in the future.
CUSTOMER: Customer will explain why payment hasn’t been processed. Keep in mind that this may be the first time that this person has been made aware of the severity of the problem. In most
cases, the contact will be able to resolve the issue and you can Continue to Closing A below. Consider offering a discount if they bring their account into good standing within 5 business
days. Consider extending payment plans and other creative means for them to remain a customer in good standing. The next step in the process will result in the end of your business relationship with this customer – a decision that should not be taken lightly. If the customer is adversarial or refuses to work with you to pay their bill then proceed to Closing B below.
CLOSING A (EXECUTIVE AGREEMENT TO PAY)
YOU: We understand that problems arise from time to time. I want to ensure you that we truly value your business. I appreciate your prompt action regarding this serious matter. Cash flow is critical to our business. We need to ensure that we are paid on time so we can continue providing you with quality products and services at competitive prices. Can we settle this outstanding balance with a credit card payment today or you can provide me with a check number and payment date?
CUSTOMER: Customer executive contact should be able to pay via credit card or should be able to provide a check number. If you’re speaking with the president or owner they may need to have their CFO or Controller process the check. Ask them to send a copy of the check to your email.
YOU: Thank you again for your assistance with this urgent matter. I assure you that we value your business but we must receive payment on this invoice in the next 5 business days to avoid
any disruption in shipments or service for your account. We want to avoid this at all costs. Again, thank you so much for the time today. Take care. Goodbye.
CLOSING B (EXECUTIVE REFUSAL TO PAY)
YOU: ’m sorry that we were unable to resolve this matter today. If we don’t receive payment in full in the next 10 business days we will have no other option but to terminate your account.
Remaining shipments and services will be put on hold and your account will be reported to credit bureaus, the Better Business Bureau, and we will turn your account over to third party
collections. You will receive a final notification via certified mail before we seek legal action to remedy this situation.
Please contact me if you change your mind and can bring your account into good standing in the next 5 to 10 business days. Goodbye.
AR EMAIL TEMPLATES
The following accounts receivable email templates are provided as general guidelines for common email-based customer communication. You can use these templates for manual communication or as automated communications sent from systems like Lockstep Collect.
REMINDER EMAIL
Attached are invoices that are due in the next of days that have an outstanding balance of . Please notify us if there are any problems with the invoices in question and let us know when payment will be processed.
You can also CLICK HERE to pay your account with a credit card in our secured, self-service online customer portal. You can make a note on invoices in the portal should you have an issue that requires our attention.
Kindly disregard this email if payment has already been processed. We realize you have many choices and thank you for your business and look forward to serving your future business needs.
PAST DUE EMAIL
Attached are invoices that are due today that have an outstanding balance. Please notify us if there are any problems with the invoices in question and let us know when payment will be processed.
You can CLICK HERE to pay your account with a credit card in our secured, self-service online customer portal. You can also make a note on invoices in the portal should you
have an issue that requires our attention.
Kindly disregard this email if payment has already been processed. We will contact you in a few days if payment has not been received.
We realize you have many choices and thank you for your business and look forward to serving your future business needs.
COLLECTIONS EMAIL
Attached are invoices that are several weeks past due. Please contact at to discuss this issue.
You can also CLICK HERE to pay your account with a credit card in our secured, self-service online customer portal.
We will contact you in a few days if we do not receive your phone call and payment has not been received.
We realize you have many choices and thank you for your business and look forward to serving your future business needs.
SALES NOTIFICATION EMAIL
Attached are past due invoices for your customer that require your immediate attention. These invoices are now several weeks past due. Please review the collection and communication notes in Lockstep Collect by CLICKING HERE and contact to discuss this matter further to avoid any further actions for your customer that may affect future sales and your commissions.
CERTIFIED EMAIL
Attached is a letter regarding a serious past due issue related to your account. This letter has also been sent to you via certified mail.
Also attached are invoices that require your immediate attention. Please contact at to discuss this issue.
You can also CLICK HERE to pay your account with a credit card in our secured, self-service online customer portal.
We will contact you in a few days if we do not receive your phone call and payment has not been received regarding this serious matter.
FINAL EMAIL
Attached is a letter regarding your final notice to bring your account into good standing. This letter has also been sent to you via certified mail. Attached are invoices related to
this matter that require immediate action.
This is your final notice to pay your account in full to avoid termination of your account before we report this matter to business credit bureaus and the Better Business Bureau
and to avoid unnecessary legal action. Please contact at to discuss this urgent issue.
You can also CLICK HERE to pay your account with a credit card in our secured, self-service online customer portal.
