Page 152 - Accounting Best Practices

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7–13 Use a Collection Call Database
also a standard time interval between the issuance of each in a series of dunning
letters—perhaps two weeks past the initial invoice due date before the first letter
is sent, with additional letters being sent every two weeks thereafter. This use of a
series of dunning letters, issued at standard intervals, is an effective and low-cost
way to communicate with customers for whom it is not cost effective or other-
wise possible to communicate.
There are various degrees of automation that can be applied to the use of
dunning letters. The easiest approach is to have a standard preprinted letter, easily
copied and mailed to a customer. The next level of automation is to store standard
letters in a computer network, where all collections personnel can access them
and make small modifications to match the customers to whom they are being
sent. Though simple, both of these approaches suffer from the same complaint—
there is no way to automatically issue dunning letters at set intervals. Instead, one
must rely on the collections staff to remember to send out the letters. A more
automated approach that takes into account the time interval since the last letter is
merging the dunning letters into the accounting software. To do so, some custom
programming is required. The programming must automatically access a text file
as soon as an invoice reaches a certain number of days past due and issue a dun-
ning letter. A different text file must be accessed as the number of days past due
increases, since more strident letters must be sent as the invoices become older.
The letters can then be printed and mailed out each day in a batch. Though this
last method provides the tightest control over the standard issuance of the correct
kinds of dunning letters, it is more complicated to set up, so it is generally best to
calculate the programming cost of making such a significant enhancement before
proceeding.
The automatic issuance of dunning letters is a cost-effective method for
establishing a continual communication with customers regarding overdue invoices.
It is particularly suitable to those situations where it is impossible to create per-
sonal relationships with customers through more expensive collection calls.
Cost: Installation time:

7–13 USE A COLLECTION CALL DATABASE

A poorly organized collections group is one that does not know which customers
to call, what customers said during previous calls, and how frequently contacts
should be made in the future. The result of this level of disorganization is overdue
payments being ignored for long periods, other customers being contacted so fre-
quently that they become annoyed, and continually duplicated efforts. To a large
extent, these problems can be overcome by using a collection call database.
A typical collection call database is a simple one recorded on paper, or a
complex one that is integrated into a company’s accounting software package. In
either case, the basic concept is the same—keep a record of all contacts with the