When overhauling your credit and collections management process, the first step is taking a closer look at the identity of your company. Once you’ve identified who your customers are and what industry you’re serving, you can move on to step two of the overhaul.
Step two begins with identifying what your problems in credit and collections management are. It is best to make a list of all of the problems you can identify before you begin to tackle them. If you’re not sure where to start or where your problems lie, below are the top five credit and collections management problems.
If customers are continually paying late, sometimes it is best to look internally and see if there is something that you can do to improve the process. Typically there are ways that you can improve invoice presentment to get customers to pay faster. Make sure that you are including customer purchase orders, billable rate or freight rates if needed. Know what is tax exempt and make sure you are not charging a tax. Most importantly, make sure you have the invoice address correct. Review all your late invoices and make sure that the correct information is there because one of the major reasons customers don’t pay is related to invoices containing incorrect information.
In credit and collections management, it is important to know who exactly should be receiving the invoice. This may sound obvious, but something the customer will give a generic email or “accounting team” to send the invoice to. Try to get a specific employees address and name who will be handling the invoice to ensure it will be seen. Also, have a specific date you invoice, whether it is the first Wednesday of the month or every 15th of the month. By having a specific date, customers will be more prepared when that invoice comes around.
If you’re working with excel spreadsheets, old aging reports or entering information manually for credit and collections management, that’s a sign you have problems. Having inaccurate or outdated information for the collections process is not effective to getting paid on time. This will hinder your customer communications, which will lead to customers putting you to the bottom of the payment list.
We can likely all agree the credit and collections management is a huge asset to your business. Without accounts receivable there is no cash flow. A great question to ask yourself is do I have enough staff to manage my accounts receivable? Further, do they have the right tools to effectively manage collections? Take the time to identify your credit and collections management roles from top to bottom. Ask for their feedback on their daily tasks and see if they feel there is a process they can implement to help collect faster.
In the vast majority of reasons companies aren’t paying, it usually is linked to invoice misinformation, invoice delivery issues or bad data. Reasons beyond the credit and collections management team’s hands are usually in the small minority of reasons for missed payment. However, you could be facing problems like businesses who simply refuse or are unable to pay.
We suggest that when tackling these problems, you take on one or two at time. If you try to fix them all at once or generally, you will likely miss the mark.