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Collections Best Practices
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can jeopardize a successful implementation. An example of the first problem is
automatically faxing overdue invoices to customers, while a good example of the
second problem is persuading the sales department to adopt a simplified pricing
structure. However, with the exception of these two problem areas, one will find
that improving the collections function with the best practices contained in this
chapter is a relatively easy endeavor.

7–1 CLEARLY DEFINE ACCOUNT OWNERSHIP

The sales staff is frequently unwilling to make collection calls on behalf of the
accounting staff, because this takes away from their time in making new sales.
However, the best contact with the customer is the salesperson, who has probably
met with the customer multiple times and has built up a firm relationship, thereby
making the salesperson the most effective collections person a company has.
To improve the collections process, a company should clearly define who
“owns” each customer account and assign collection responsibility to the sales-
person who has been given account ownership. “Ownership” means that the
salesperson’s name or sales region number should be included in the accounting
database for each customer name. This does not mean that the bulk of the sales
staff’s job is now collections, but rather that the accounting department’s collec-
tions staff can now call upon specific individuals in the sales department when
they feel that they will not otherwise collect payment on an invoice. To enhance
the cooperation of the sales staff in the enforcement of collections, the compensa-
tion of the sales department manager should be tied to the proportion of cash col-
lected from customers, which will entice this person to force the cooperation of
his or her staff with the accounting department.
This concept should also be extended to the collections staff. There are usu-
ally specific customer issues associated with the nonpayment of an invoice, which
must be repetitively researched if a collection problem is circulated throughout
the collection staff. A better approach is to assign customer accounts to specific col-
lections personnel. By doing so, they gain an understanding of each customer’s par-
ticular issues, as well as have a chance to build relationships with their accounts
payable counterparts at the customers’ place of business, which frequently results
in faster resolution of issues and therefore quicker payment by customers.

Cost: Installation time:

7–2 UTILIZE COLLECTION CALL STRATIFICATION

The typical list of overdue invoices is so long that the existing collections staff
cannot possibly contact all customers about all invoices on a sufficiently frequent
basis. This problem results in many invoices not being collected for an inordi-