Manage Your Receivables

Actions to take first

The sample collections policy below shows how one company handles overdue bills. Your policy might have a longer time scale or fewer steps, depending on what's common in your industry, your relationship with your customers, and the amount of time you want to devote to collections. Whatever your plan, you should follow up with late paying customers quickly and repeatedly. In general, the sooner you contact a delinquent customer, the more likely you are to get paid. Use an escalating scale; begin with a friendly attitude and become gradually more insistent and formal in communicating that the customer pay their overdue bills.

Avoid high-cost, low-return collections. Consider the likelihood of recovering the money owed to you, the total amount due, and how much it will cost in payroll and materials to make the money materialize. The best way to reduce these costs is preventative: be proactive by setting up a clear credit policy and using it consistently.

If you've tried everything and you still can't collect on a bill, it may be advantageous to hand the account over to a professional collections agency. When and how you do this will affect your chances of recovering the amount due.

Sample Collections Policy

Action	mail or email a friendly reminder
When	on payment due date
Notes	QuickBooks has a template. Customer name, billing address, and amount past due are automatically entered based on the information you have recorded in QuickBooks. Remember to document this action in your records.
Action	mail a firm letter requesting payment
When	two weeks following due date
Notes	You can use the QuickBooks template for this, too. Make it easy for your customer to pay by including a self-addressed, stamped envelope. Remember to document this action in your records.
Action	phone the customer
When	three weeks following due date
Notes	Try to determine the cause of non-payment and resolve the issue. Is the customer dissatisfied with your service or in a temporary financial bind? Consider the value of maintaining a good relationship with the customer, as well as the need to collect what you’re owed, and be prepared to offer assistance. Resolve customer complaints or suggest a payment plan. Insist on a firm schedule, and put your agreement in writing. It’s important to record the date and details of your phone conversation, or ask your customer to make his demands in writing. Remember to document this action in your records.
Action	mail a collections notice
When	five weeks following due date, if customer has not been responsive
Notes	Collections notices are most effective when they are brief and aimed at a single purpose. Be definite, concise, and specify a last-chance date for payment. QuickBooks has a collections notice template. Remember to document this action in your records.
Action	send account to a professional collections agency
When	seven weeks following due date
Notes	When should I use a collections agency?

	Back to Collect overdue bills
	Actions to take first
	When to use collections
	Selecting an agency
	Last resorts