Overdue Accounts

Purpose

• overdue accounts are addressed in a timely and appropriate manner
• sensitive accounts are managed in ways that ensure that payment is obtained without unduly upsetting the customer

Background

Cash flow is the lifeblood of business and the performance of your receivables cycle holds the key to maximising your cash flow.

It starts out as a customer service function, with calls and letters to verify satisfaction, encourage payment and forecast potential problems. All are handled in a customer-oriented manner.

Then follows a steadily escalating process to ensure payment is received for works performed or products provided.

Scope

Accounts receivable staff and management

Procedure

This procedure has been left largely untouched because it varies widely from business to business.  In designing step by step procedures, plainly the best approach is a steadily escalating pressure to obtain payment. 

Usually this will start with a friendly telephone call for accounts over x amount of dollars and late by x days.  Normally this will ensure that payment is received by those who have merely mistakenly failed to make payment. 

REMEMBER TO MAKE FILE NOTES REGARDING PAYMENT. 

Next steps will require a form letter modified to suit the circumstances.

• Try not to be too generic. 
• After this letter is sent, normally a further follow up call is appropriate – ask when the payment will be made and diarise it.
• Call the client again on the diarised date to ensure payment will be made.
• A further more stern letter will need to be sent for further defaults.
• A Manager will need to follow up this letter with a telephone call seeking to identify the reason for payment default and making arrangements for collection.
• Consider the use of outsourced receivables management.
• When and if payment is unlikely to ever be received – identify what accounting and other steps need to be taken to identify the debt as a “bad debt”
• Consider at every stage what action to take to ensure that the customer does not run up further debt – that is, that the customer cannot make further orders whilst recovery action is occurring.

What you will need before you begin

Steps

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Tips

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Traps

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