Effective tips for improved payment collection


Date: 27 July 2022

A file of overdue invoices

You won't achieve profitability and the smooth running of your company if boring and recurring tasks drain your time. Accounting duties like payment collection can be time consuming if you must chase overdue invoices. Such processes can take a toll on your business productivity.

Fortunately, efficient operational processes can bring a remarkable turnaround in your business. It helps if you create a sequence of events to encourage your customers to pay.

Payment collection processes

An effective cash collection process can resolve payment challenges. The steps listed below can help you achieve your aims.

Assign the collection task

Cash collection isn't a task that most employees relish. It can negatively affect your company's cash flow if it's not done properly. Ideally, you need an employee trained to make effective debt collection calls and with ample time to carry out the task. Employing a salesperson or clerk who will be accountable for payment collections is ideal.

The employee verifies any deduction claims made against overdue invoices. Your collection officer will balance the deduction amount if your company grants it. The employee can then contact the customer, encouraging them to pay up.

Send dunning letters

Send a letter demanding the remittance of the unpaid invoices. State the invoice number and amount overdue in the letter addressed to the customer. It is possible to periodically send reminders using accounting software.

Contact the customer

Call the accounts with unpaid invoices. Find out the reasons for the delayed payment. Then, record each customer's reason for the delay, the call date, and the name of the person contacted. Make a note of any promises of remittance made.

You should document your company's terms if you agree to extend the payment window for any contacted customers. You should also note any personal guarantee for the payment or interest on the amount owed.

Credit limit adjustment

During the call, the collection officer can gather information about the overdue customer's financial state. The collection officer might can recommend the customer's credit limit is cancelled or reduced until the outstanding payment has been made.

Keep track of payment settlement plans

You should monitor the arrangements made for the payment of unpaid invoices. The agreed payment dates may differ from the company's usual date for receiving payments. You should send prompt reminders to the customers, so they don't miss the settlement date and further delay the payment.

Seek the assistance of a collection agency

If the attempts of your collection staff don't yield a positive outcome, you could employ the services of a debt collection firm. You should also put the customer's account on stop so that they can't accrue any further debt.

Take legal action

If a customer fails to pay despite all the efforts to collect the payment, you can take legal action to recover the debt. Your legal staff can assess whether legal action is likely to succeed and whether the customer will be able to pay if you are successful in your claim. A lawsuit is an alternative if the case against the defaulter is sufficient and the individual possesses enough assets to settle the debt.

You might be forced to write off the outstanding balance if your cash collection efforts fail. However, you should review your company's operational systems to see if they contributed to the bad debt. For example, were your credit checks insufficient? Make sure you take steps to rectify any failings you discover. Efficient cash managers can bolster your collection activities or eliminate any stages not applicable to customers.

You can also adopt payment automation to help you make better business decisions. For example, an accounts receivable tool like Upflow can manage your payment collection and help you control your cash flow.

Payment collection plans

Your sales must convert into cash. If you have outstanding balances from unpaid invoices, they can hold your business back. Fortunately, adopting best practice payment collection process can improve your chances of receiving payment when due.

Migrate to the cloud

Manual creation of invoices is time-consuming as it requires repeated data entry. Using cloud-based services can speed up the collection process. You can gather payment data by clicking a button. Customers can also view the invoices you have sent online and make their remittance. Cloud-based services can also help to protect the company's data from getting lost or stolen.

Monitor the billing procedure

Make sure the invoices contain all the necessary information and are sent promptly to customers. Sending your invoice promptly can help avoid delayed payment as you're less likely to miss a cheque run. Include your company's payment terms and explain that interest can and will be charged on an overdue invoice. You should also make sure that you have communicated your terms of trade to the customer and get your customers to agree them.

Adopt flexible payment options

An easy payment process can accelerate your cash collections. Provide multiple payment options for your customers. Ensure your invoices contain the right contact information for each customer. They should also have a convenient option (such as a QR code) for each customer to make payments and track the receipts.

Payment automation can help you collect recurring payments from your customers' bank accounts on an agreed date. Automating regular cash payments enhances your cash flow and minimises time-consuming accounting tasks.

Offer discounts

You can offer your customers two prices: a discounted price for immediate payment upon invoicing and a higher amount if the person wants to pay later. The discount will encourage your customers to pay on time. You can also give discounts as an incentive for advanced payment, reducing the risk of delayed or non-payment.

Set up reminders

Don't allow an invoice to pass its due date before you initiate contact with a customer. Email or call your customers five days before the bill's due date. A service call to ask about customer satisfaction and if the invoice was received is ideal. However, get the customer to commit to a payment date. If you don't receive the payment within the given period, follow up with a phone call or email.

Regain control over your cash receivables

You need to recognise the type of late-paying customers you have. Do they pay after they realise they have defaulted or give excuses to further delay the payment? Do you have customers that make excuses to avoid making the payment? Whatever type of late-paying customers you have, a systematic payment collection process like Upflow can help you manage your customers. It sends automated and personalised emails to customers and provides a convenient payment portal for each customer.

Copyright 2022. Article was made possible by site supporter Malik Abdul Jabber, Top on Tips .

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