Monday, 18 November 2019

In a perfect world, trains run on time, Plan A goes without a hitch, and all bills get paid when (or before) they're due. 

But because the world is far from perfect, there are times when corporate bills go unpaid, which can impact the cash flow and the business relationship.

So how do you handle it?

Past due calls and letters

Joe Batie is the chief commercial officer for Caine & Weiner, an accounts receivable firm that services businesses around the globe. Here is the typical collections time frame for large companies, he says:

  • Unless otherwise indicated, the in-house delinquency collections clock can start anywhere between 1 to 30 days after a business or individual receives an invoice.
  • There's a friendly past-due 60-day reminder. 
  • At 90 days, it's more of a traditional collection call, but it's still typically handled in-house. Typically, account closure would be warranted at this point.
  • Around the 150-day mark, a company writes it off as a 'bad debt' and turns it over to a third-party collection agency or attorney to utilize traditional collection tactics.

Fees for collection services may vary depending on the amount of debt owed and how many collections you'll need. They can either charge a flat fee or a contingency fee of up to 45 percent of the debt, which may make sense if it comes down to collecting something or nothing. For referrals, talk with your business community, chamber of commerce. You can also search the Association of Credit and Collection Professionals. for licensed, bonded and insured agencies.

Creating a solid foundation

A well-oiled revenue process starts with a good collections philosophy from the initial sales contact through the contract and to the credit-control and billing process. When these are in place, you'll only need to follow up on collections from the most difficult clients and customers.

An expert on corporate collections for multinational companies such as Fox Cable, AOL and now, Oath, the company created when AOL and Verizon merged, Phil Campbell regularly manages millions of dollars worth of international account portfolios each month. Campbell says one of the most common mistakes companies make is not having everyone along the revenue chain on the same page when it comes to the collections process.

“It's important to stress to the sales team that no deal is truly closed until the last dollar owed by the client has been received by the company," Campbell said. “A good salesperson who works with collections early in the process to diplomatically communicate our position can save everyone a great deal of time."

Batie adds that communicating a sound credit policy to new customers during onboarding will help mitigate future issues. "You want to have some very diligent follow-up steps as they become a customer and they're becoming acclimated to your system. You want to be very, very diligent when it comes to following up on 'past due' payments," he said.

There are some actions you can bake into your process to make invoicing more bulletproof, says Elliott Portman, a New York-based attorney who represents creditors in several industries. Guidelines for his clients include:

  • Obtaining credit information as part of your customer order system. It's a more seamless way to collect and can weed out customers who aren't serious about paying.
  • Adding terms and conditions on your quotes and contracts. Disclose late fees and/or finance charges, as well as any other collection policies such as recovery of attorney fees in the event of a default.
  • Getting a down payment. A deposit makes sense, at least in the beginning, until you can verify your customer's creditworthiness.
  • Understanding stress points. Know what's critical to the success of the customer's business — for example, if you're manufacturing a critical part, let them know you'll no longer be able to deliver those until you're paid. This helps put you on top of the priority list.
  • Picking up the check in person. Sometimes showing up in person (in a polite, respectful way) provides added incentive. 

Debt collection and reputation

The major difference between debt collection for a large corporation and an emerging one, Batie said, is the sheer amount of data involved and the compliance required to safeguard it.

"If they're a very well-defined large company, then they typically have an IT or security department that mandates certain types of security that need to be in place by the agency. But on the agency side, it's usually the compliance director or the security director that manages it and presents it to the client," Batie said.

The other critical element for large companies: Maintaining the right voice in collections processes, even if they are outsourced. "The mindset spans all the way from compliance to recovery to customer-centricity, especially when you're looking at large portfolios," Batie said.

That's why it's critical to find a collections partner that won't resort to strong-arm, unethical tactics. Look for an agency that understands the importance of protecting your company's reputation. Companies also want to ensure employees don't violate the Fair Debt Collection Practices Act by calling beyond business hours, using abusive language, or making threats.

Campbell says even though large and mid-size companies may have multiple revenue streams, collecting on unpaid bills is critical to efficiently manage operating capital and stay competitive.

“The revenue needs to come in consistently and predictably, regardless of the source. For a company to manage its accounts receivables effectively it needs to implement billing and collections processes that make sense for its size and its unique needs," he said.


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