Maximize Receivables Collection Without Alienating Customers

When it comes to collecting trade receivables, effectiveness is as much savvy as system. The #1 rule is persistence. In collections, the squeaky wheel really does get the grease. At the very least, be sure your company is top-of-mind with the payables clerk. Your collection staff should maintain a friendly relationship with him or her and, ideally, it should be strong enough to obtain a favor when needed.

It makes sense for the people in your organization that do the collections to be different from the people doing the selling. Shield yourself and your sales staff from potential relationship strain that could arise out of the credit and collection process. Try to have an accounting person handle collections.

When problems occur with collection, avoid blaming individuals. The problem should always be with policy. The attitude should be that your company's policy is an immovable force and is reasonable. As deadlines are pushed, the clerk of your delinquent customer should feel the hurt of his/her counterpart responsible for collecting.

Considerable pressure can be exerted on the delinquent customer when credit policy prevents new orders from shipping until payments are received. Every credit policy should limit both the total amount of credit extended and the time allowed for payment of any invoice (days from invoice date). If either is reached, orders must stop. Although your sales force may raise hell, you must prove that the rules cannot be bent. Soon your sales force will leave you alone and look for other solutions (e.g., customer payment). Your salesperson always should identify with customers' purchasing agents in cursing the rules but also subtly convince customers that the policies are normal and fair.

When making a call to collect a past-due account, allow the customer to maintain his or her integrity. Don't blame the person; blame the situation. Assume the customer is immensely busy and apologize for any intrusion. Listen to his/her problems with empathy, whether of a personal or business nature. Then be firm that the matter must be cleared up somehow. Get them to brainstorm for solutions. Offer ideas and help anyway you can: reminders, resend invoice copies, pick up the check personally, etc. If they repeatedly resist, remind them that they must comply with the rules they agreed to when they purchased your goods or services. Of course, be sure your standard sales procedures include the customer's written consent to your rules for granting credit.

Finally, don't be concerned with whether all creditors are paid, only whether YOU are paid. Make sure you are paid first, or at least early, and before things deteriorate. Note: Advice in this article should be considered in tandem with that in "Getting Paid: Sound Credit Policy and Collection Procedures".