Accounts Receivable Ideas

Your receivables department can collect more by employing simple, proven methods.

Accounts receivable is money owed a company for supplying products and services. The source of accounts receivable is a credit line with money owed within a specified time frame. A receivable transaction results from a sale made without money having been collected for the sale. Understand specific ideas for effectively managing accounts receivable and you will collect more for your company and improve company profitability.

Account Assignment

Assign older less collectible accounts to more senior collectors; their experience makes it more likely that they will successfully collect money owed. Assign less seasoned collectors to make first calls to newer past due accounts.

Process Management

Develop a specific process for collecting past-due accounts. The process should include such steps as assigning past-due accounts to collectors, making phone calls and mailing to third parties, such as another collection company. Develop written procedures based on the process and train and reinforce those procedures with collection staff. Periodically audit procedures to make sure they are followed. Evaluate procedures at least twice a year and determine how they can be enhanced to reduce costs and increase the effectiveness of collection activities.

Client Retention

Keep the retention of clients in mind when contacting them to collect past-due amounts. Although the goal of your department is to collect past-due money, it is also important to handle communications with customers so that when past-due money is collected, they will continue to do business with your company.

Flexibility

Be flexible in your collection approach and work out an approach for repayment that will work for the company and for those owing your company money. Confirm in writing the collection approach that you have worked out with the customer.

Staff Management

Hold a weekly meeting with all collection department staff. Get agreement on specific goals for the department and report weekly on goals versus actual performance. Praise collectors who have done an above-average job. Establish an open door policy so that if employees need help or advice, they can freely contact you. Periodically review employee performance and give employees frequent feedback.

References

• Eisencraft CPA; Timely Ideas for Accounts Receivable Management; Gary Eisenkraft, CPA
• The Silburg Company; A Publisher's Cash Management Plan: Asset-Based Lending; Daniel R. Siburg

Resources

• Institute of Financial Operations