Page 154 - Accounting Best Practices
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                                7–14  Implement Customer Order Exception Tracking System
                                contained in the accounting software (e.g., names and addresses) and the same
                                information in the tracking software. This contact information must be reloaded
                                manually from the accounting software into the tracking software. Likewise, any
                                change to the contact information in the tracking software must be manually
                                updated in the accounting system. Despite its limitations, maintaining a separate
                                tracking system in the computer is an inexpensive way to maintain a centralized
                                contact database.
                                        Cost:                 Installation time:

                                7–14 IMPLEMENT CUSTOMER ORDER EXCEPTION
                                      TRACKING SYSTEM

                                Many of the problems that result in collections work begin much earlier, from the
                                time an order is entered into the system to the time it is produced, shipped, and
                                invoiced. This interval is not one that the collections staff has any direct control
                                over (unless the collections manager happens to run the entire company!), which
                                means that problems upstream from the collections department will nonetheless
                                have a direct and continuing impact on the quantity and type of problems that the
                                collections staff must handle.
                                   A good best practice for rooting out problems before they become collection
                                issues is to set up a reporting system to track exceptions for customer orders as they
                                move through all of a company’s various processes. By keeping close tabs on these
                                reports, the manager of the collection function can tell when there will probably be
                                collection difficulties. By determining problems with specific customer orders in
                                advance, the collections manager can work with the managers of other departments
                                (mostly by suggestion) to correct problems before orders are shipped. A crucial fac-
                                tor in the success of this best practice is the interpersonal skill of the collections
                                manager, who must bring customer order exceptions to the attention of other man-
                                agers in such a way that they will not reactive negatively, but rather work with the
                                presented information to make prompt corrections to their systems.
                                   Another use of the reports is to recognize which orders are likely to result in
                                collection problems and to use this information to start making collection calls
                                earlier than normal, so that any customer problems can be discovered, addressed,
                                and resolved before the associated accounts receivable become inordinately old.
                                By using the exception reports to manage accounts receivable more closely, it is
                                possible to maintain a high accounts receivable turnover ratio, which frees up
                                working capital for other purposes.
                                   The number of reports used to track customer order exceptions will vary dra-
                                matically, depending on the types of systems already in place, the services or prod-
                                ucts offered to customers, and the type of industry. This range of options makes a
                                complete list of all exception reports impossible to present, but the following list
                                is a representative sample of the types of information that a collections manager
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