When it comes to your accounts receivable, it’s important to first understand the processes you currently have in place and then how to leverage these processes to mitigate your risk and increase your chances of payment.
Once you know what A/R processes you have in place, you can decide how best to supplement these. On day 31, or even one week before then, reminder phone calls and emails can be useful in drawing a client’s attention to the fact that they have a bill coming up. These can be very courteous and polite, but these actions let your client know you expect to be paid.
Once a client’s invoice has become past due, it’s time they received a phone call. It’s easy to ignore an email, but when live communication is involved, the stakes are a bit higher. It’s also may be easier for you to gauge the client’s intention to pay. Also, if the phone number has been disconnected, this would immediately indicate further investigation is needed to determine whether or not the company went out of business.
Regardless of whether or not your phone call was productive, a follow-up letter should be sent if you have not received payment by day 45. This creates a paper trail to show that you have taken steps to collect the funds that are owed to you.
If this still doesn’t produce results, you need to involve the members of the firm higher in the chain. The next action is often decided on a case-by-case basis. How much does this client owe you? How long have they been a client? What has their behavior been up to this point?
A phone call that determines a credit agreement should occur which establishes your stance on interest and the client’s liability for any fees incurred by a collection agency. You can also ask for a personal guarantor liable for any outstanding debt should the company go “out of business” but reopen with a similar name and type of service. This should also be supported by documents in writing.
If you’d like to speak with a Beaton Accounting representative for professional advice on your collections, call us today for a FREE consultation: 631-921-6894.
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