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  • The art of collections

  • Two recent conversations reminded me of the importance of collections to the cash flow of a business and the ability to use that cash flow to grow your business. Too often, I find that businesses have delegated collection of accounts receivable and then do not adequately supervise that critical function.

    The art of collections is based on persistence and regular calling of customers with the expectation that all customers will pay you on the due date. If the person responsible for this is only calling accounts that are significantly in arrears, they likely are not achieving what is possible: to collect as much as possible, as soon as possible.

    The objective is to set expectations and engage in a dialogue that encourages the customer to put your invoice at the top of their list of priorities. This can often be achieved by being the politest, most persistent squeaky wheel, so that they want to stop your persistent calling. Some customers are more difficult than others, but some are just playing their side of the game in which their role is to delay paying you. Some tactics that work very well are:

    1. Call the customer before the due date, to enquire whether everything is in place to pay you by the due date;
    2. Call the customer on the due date, or the day after, to enquire what the status of payment is, as the invoice is now overdue;
    3. Ask the customer what is holding up prompt payment;
    4. Ask the customer when you can expect to be paid and then follow-up to remind them of this;
    5. Call regularly, so that they know that you will call again and again, until you receive payment;
    6. If you say that you will follow-up, do so, on the date that you said you would. Ensure that they know that you are an organized professional and take the collection seriously, as a top priority;
    7. If you cannot speak to the person responsible, leave a voice message. It is not as good as a conversation but it does count; and
    8. The staff responsible for collections should have regular meetings with their supervisor, to review the status of key accounts, so that they are challenged and know that this is a very critical role that they play in the success of the business.

    If you follow the steps above you will often significantly improve the success of your collection efforts.

    If your finance/accounting team is not fulfilling the needs of your business and need guidance, please contact me me at (416) 726-8256 or James@MastermindSolutions.ca

    James Phillipson is a Chartered Accountant and a Principal of Mastermind Solutions Inc. with over twenty years experience in large and small businesses.  He has provided financial counseling to his clients since 1996, often in the role of a Controller or Chief Financial Officer, for both public and private corporate clients.  James has experience in financial roles in a wide variety of businesses and industries.  This includes several large corporations and many medium-sized public and private companies.