Collection Policy has a direct impact on the quality of AR and the DSO your company will need to finance. It is the formalization of the practices and procedures used to collect AR and deal with past due accounts. Collection Policy gives your collectors a road map to follow and do their jobs efficiently and effectively.

The steps that should be outlined in a Collection Policy include:

Customer Contact

Collection Policy should include when to contact a customer about an outstanding invoice.

Sequencing can help you determine when to contact a customer. Sequencing is the process of automatically sending accounting information via email, text or phone calls to your customers over a period of time, based on user actions. Sequencing uses customer data to choose the best approach for each account.

Knowing when to contact a customer will lead to more efficient and successful collections.

Method of Contact

Collection Policy should indicate the channels of communication to be used for customer contact including email, text, phone calls and mail or special delivery.

Sequencing can help you to determine which channel to use based on customer preference indicated in Onboarding Sequencing and actual customer data.

Some customers do not want emails, automated phone calls or texts. For these special situations use White Glove Sequencing to establish a schedule to touch base instead.

Dispute Resolution

Collection Policy should provide guidelines for resolving disputes and late payments including:

  • Credit Hold – When and how to use.
  • Partial Payments – Trading order releases for payments.
  • Payment Plans – Long-term workouts, may need legal input.
  • Unauthorized Deductions – Process to follow to facilitate resolution.

Serious Past Due Accounts

Collection Policy should include guidelines for collecting seriously past due accounts such as:

  • When management should be involved in the collection effort.
  • When to send letters advising that past due accounts will be turned over to an external collection agency or attorney for collection.
  • When to turn over accounts to a collection agency or attorney.

Bad Debt Write-Off

Collection Policy should address when an account should be written off and the approvals required.

Establishing a Collection Policy is an important part of your Credit Policy. It provides policies and procedures for your AR team to follow. It will help to manage and control DSO, and make collections more efficient and effective.

For a Collection Policy to be effectively employed you need Sequencing and other technology available with automated accounts receivable and collections. Automation will give your team the resources to stay ahead of the curve on DSO.

The key to successfully automating accounts receivable and collections is to work with an experienced software partner.

Lockstep Collect is a market leader in cloud-based credit and collection platforms. Lockstep Collect can help you implement the technology applications you need to reduce and control DSO.

If you would like to learn more about how you can benefit from automating collections and accounts receivable, please contact Lockstep Collect at