Top five Ways to Reduce Past Due Accounts on your Aging Report

When a Business provides a product or service, it has a right to expect to be paid on a timely basis.

Accounts not paid in a timely manner can have a serious impact on the Business. It is becoming increasingly

important to be mindful of these trends as the economy continues to remain difficult in many communities.

Staff members quickly realize that managing the accounts receivable is tricky and involves the delicate matter of asking for payment without coming across as harsh. There are new processes, once implemented, that can be effective in obtaining payments diplomatically.

Many offices have knowledge of best practices in accounts receivables. However, once an account begins aging on your A/R, you may find these Top Five ways to improve unpaid accounts useful:

1. Have a defined financial and past due account policy:

One of the major causes of overdue receivables is that your office has not clearly defined when payment is due. Make sure that your payment terms are clearly stated in writing on the Invoice. If payments are late, have a defined procedure for the office staff to follow as to when to make a call at day 15 and when to send a reminder notice day 31. Business are also utilizing automated phone contacts made in the ‘Business’s Name’ to help in this area.

2. Send out invoices promptly and consistently:

If you don’t have a systematic billing system, get one! Many times, the Customer has not paid simply because they have not received an invoice or it was late. Once reminded, most Customers are likely to pay in a timely manner. Doing the necessary follow up and getting reminder every 15 days can make a big difference.

The old adage “The squeaky wheel gets the grease” has a great deal of merit when it comes to collecting past due accounts. It’s an excellent idea to contact late payers every 15 days.

3. Use your aging sheet, not your feelings.

Many Business’s (or well-meaning employees on staff) have let an account age beyond the point of reason because he or she felt the Customer would pay eventually. While there may be a few exceptions or unusual situations, the fact is that all Customers should be treated in the same manner and that expecting to be paid on time is your right. Try to focus on EVERY account going over 45 days and stick to a systematic plan of follow up.

4. Make sure your staff is trained.

Even experienced staff members can sometimes become gun shy when dealing with past due accounts. This is especially true when promises for payment have been made and broken. It is important to be firm, yet courteous, when dealing with the excuses being delivered. Be sure your staff has all the tools to make it easy to process a credit card payment or ACH check draft if you can.

5. Use a third party sooner.

Once you have systematically pursued your past due accounts for 31-45 days (and they have avoided your attempts to contact them), you may want to send them a FINAL NOTICE allowing 10 days to pay with a specific due date. More than likely, if they have the ability to pay you they will do so or at least communicate their intentions.

A new widely used next step is placing their account with a Pre-Collect service. Pre-Collect services allow you to keep 100% of the money collected. Most Business’s do not have the time to pursue accounts going over 60 days, so at that point you should take the next appropriate step to get paid.

The impact of the Pre-Collect and a ‘Third Party’ tends to reprioritize the debt and forces the Customer to make a decision on the payment. Designed for early intervention, a ‘pre-collect’ service can save the Business the internal costs of working accounts beyond the point of reason. Typically, once an account reaches 60 days, you should consider using professional Third Party intervention.

Remember that nobody collects every account.

Even by setting up and adhering to a specific collection plan, there are a few accounts that will never be collected. By identifying these accounts early, you will save yourself, and your office, a great deal of time and expense. Even though a few may slip by, you will find that overall, the number of slow pay and nonpaying accounts will greatly diminish, and that’s a victory in itself!

Provided by Michael Glass of TSI