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Collection Prevention Series – Part 1

Accounts Receivable Collections

Collection Prevention – Part 1

 

This series is based on my belief, after nearly 30 years of making collection calls in over 40 industries, that almost all collection problems are preventable. That means YOU could have done something to save yourself the aggravation and expense of having to use a collection agency to begin with.

Learning how to collect, when to collect and when to turn to an agency for help, is important, but a little bit of work upfront and you can prevent 80% or more of your collection problems before they begin.

Collection Prevention Begins with the Sale!

I’ll bet you thought I was going to start with credit checks didn’t you? It is important that you check credit if the sales amount warrants it, and I will talk about it later in the series, but I want to start with one of my personal pet peeves, incomplete or non-existent contact information.

So, my first question is, do you have a system in place for collecting complete contact information during the sale? And, where do you put the information you get? If those sound like stupid questions, consider this, in more than 80% of the companies I’ve collected for, both accounts receivable and bad debt the only available contact information is either the email or cell phone number of the buyer.

I’m not talking about single person companies either, this goes on in companies with millions of dollars of annual revenue and dozens if not hundreds of employees. No main number for the company, no last name for the purchaser, no information for accounts payable, the controller or the owner. Shipping or delivery address only, often a warehouse or service center with no office employees. Ask these folks for accounts payable and they won’t know what you’re talking about!

It blows my mind (am I revealing my age with that term?) when I pick up an aging with 40% of the receivables over 90 days and find the only available contact information is the disconnected cell phone number of the person that placed the order. This is NOT TRIVIAL! And everybody does it. I’ve been guilty of it myself, you get excited during the sales process and get the information most relevant to your sale, how many and how much.

A Simple Solution

I keep a form in front of me with all the questions I need answered, in my case it’s a 2-part form and I have them spiral bound with 50 sets to a book. One copy goes to the data entry person and I keep the one in the book, so I always have a printed copy in case all the information doesn’t get entered into our database. Not sure how that happens, but it does, and it probably happens to you too.

The Bottom Line

Rule # 1 – Get complete contact information at the time of the sale.

That includes the phone number and address of the primary entity. Not just the purchasers phone number and shipping address. When you can, get the owners name and the name and phone number of the accounts payable department or contact. In larger companies try to get the controllers name. Consider discussing how the company pays with your buyer, they usually know if the company is a slow pay and “forewarned is forearmed”.

TakeawayDownload your free contact information check list here – BTW have you read “The Checklist Manifesto: How to Get Things Right” by Atul Gawande? It’s a terrific book about the value of check lists, read it and you’ll find a new respect for the lowly checklist.

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