Page 164 - Accounting Best Practices

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Summary
SUMMARY 153
The job of collecting accounts receivable is a hard and thankless one. The person
who performs well in this position is the one who finds out why a customer pays
late and then works with other departments in the company to ensure that the cus-
tomer has fewer reasons for doing so in the future. This approach is embodied by
many of the best practices that were presented in this chapter, such as simplifying
the pricing structure, examining customer orders to see if there are any shipment
problems, and granting credit levels in advance, eliminating any last minute pres-
sure to grant an inappropriate level of credit that the customer can abuse. It is also
important for a good collections person to keep accounts receivable from becom-
ing overdue in the first place. Some of the best practices in this chapter address
this issue, such as granting early payment discount terms and immediately apply-
ing all cash as soon as it is received. Another part of the collections job is to per-
form collection calls as efficiently as possible; this task is addressed by other best
practices, such as using automated faxes of overdue invoices and dunning letters,
as well as a collection call database. Finally, the collections staff must use all pos-
sible pressure points to collect from customers, which it can do with the use of
such best practices as collection call stratification and a database of customer
assets. When all of these tools are properly utilized, a collections staff not only
can perform its job more efficiently, but can reduce significantly the amount of
overdue accounts receivable at the same time.