Debt Collecting Guide
For Business Owners To Improve Their
Accounts Receivable
Debt collecting has become an everyday fact of life for many business owners, especially during this troubled economy. While this can be a daunting task, it is a very necessary one to maintain the overall health of your business and cash flow. Taking these very important steps will greatly help and ensure your business' financial bottom line. Checking For Credit Worthiness: Part of A Successful Accounts Receivable PolicyBefore you take on new customers, make sure to check their credit worthiness. If you don't have the direct ability to check credit, look to outside providers who can offer the service for a nominal cost. This small fee is definitely worth avoiding much larger financial headaches from customer payment defaults down the road.Not knowing ahead of time the credit worthiness of a new prospect has cost many a business owner in lost revenue and wasted time in chasing after defaulting customers. Clearly Written Customer AgreementsA customer agreement should be part of every new potential business relationship. While many businesses enter into new relationships without them, you risk problems later. A well-written agreement should spell out the terms and expectations in simple, concise and clear language.It should include when payment is due, what happens when payment terms aren't kept, any additional late fees or interest, as well as the customer bearing the cost of collection, should the business owner outsource the debt collecting to a collection agency. Consistent Followup On Late InvoicesIt would be great if all customers paid their bills on time without constant reminding, but that's not the reality for some. Unfortunately, business owners have to implement a consistent policy of following up on those few delinquent customers. They key here is consistent follow up.After invoicing your customer, call them within a week or two. Both to ensure they received the invoice, as well as to ask if they're happy with the product or service. This will also serve as a friendly reminder that payment is expected soon, and on time. If there are any problems, an early phone call can easily rectify matters, and prevent a small problem from serving as an excuse to delay payment. If payment hasn't been received by the invoice due date, call 3-5 days afterwards in a friendly tone. Ask if there's been an oversight, or if you can do anything to speed the payment process along. Call again in 5-10 days if you still haven't received payment. The key here is constantly staying in front of your customer. As the saying goes, "The squeaky wheel gets the grease", if you stay in contact with your customer, you're more apt to stay at the fore of their mind, as they likely have other bills. Internal Accounts Receivable Debt Collecting PolicyTo prepare a complete accounts receivable plan means constructing a detailed plan for debt collecting. This will safeguard you against any future non-payments. If you make it clear to your customers right from the beginning about the steps you can take if the payment is not made in time, you minimize confusion later on. If you are starting a new business, then you benefit greatly by setting up the rules and regulations afresh. But in case your business already has set policies, and has experienced non-payment from time to time, then you should consider setting up new accounts receivable policies for debt recovery. 
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