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Chapter 7
Collections Best Practices

One of the worst jobs in any company is collecting on overdue accounts receiv-
able. The person who must do the collecting never knows if an invoice has gone
unpaid due to the company’s fault or the customer’s. There may be a very valid
problem caused by the company that is making the customer wait on payment of
the invoice, such as a damaged product shipment, a billing for the incorrect
amount, or pricing that does not match the customer’s purchase order amount. In
these cases, the collections person apologizes to the customer for the company’s
sins and then tries to correct the internal problems responsible for the collection
trouble. In other cases, the collections problem may be caused by the customer,
who either cannot pay or who is deliberately stretching the payment period past
the agreed-upon date. In these cases, the collections person must diplomatically
bring pressure to bear on the customer, which is a difficult skill. No matter what
the reason for an invoice being overdue, the collections person must ascertain the
correct reason for the problem and fix it.
This chapter provides many best practices that allow a collections staff to
reduce the error rate of invoices being sent to customers, while also providing new
tools to force customers to pay by the due dates listed on company invoices. In
addition, there are several best practices here that can enhance the operational effi-
ciency of the collections staff. In short, this chapter makes the collections task easier,
while reducing the amount of overdue accounts receivable at the same time.

IMPLEMENTATION ISSUES FOR COLLECTIONS
BEST PRACTICES

There are a surprisingly large number of best practices that can be applied to col-
lections. Some are located in other functions, such as sales and credit, that have a
direct impact on the collections function, while others are more directly associated
with the activities of the collections department. Most of these best practices are
relatively inexpensive and easy to implement, as noted in Exhibit 7.1. The exhibit
notes the estimated cost and install time of implementation for each best practice.
In most cases, it is a relatively simple matter to complete an implementation, with the
exception of those items that require custom computer programming or that involve
the participation of another department. In these two cases, either the risk of a
lengthy programming project or the refusal of another department to cooperate

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