IMPROVING YOUR COMPANY’S CASH FLOW
Billing & CollectionsBest Practices
byGene Rodriguez
Transworld Systems, Inc.
Gene Rodriguez
Senior Account Executive5 Years with Transworld Systems,Inc.
Phone: 727-432-5690Fax: 813-286-2587Email: [email protected]: www.web.transworldsystems.com/Tampa/
Address: Transworld Systems,Inc. 5601 Mariner St., Ste. 475 Tampa, FL 33609
Best Practices Start at the Sale
•Written Agreements•Payment Terms•Possible Penalties for Violations•Proof of Commitment
What to include on an invoice?
• A clear invoice # and request it on check• A specific due date• Details including the date of service, the
case, time spent, copies provided along with corresponding rates
• Acceptable forms of payment• Your phone #• No 30, 60, 90 boxes
Start Early – Recover More We all know that the older an account gets, the harder it becomes to collect. But did you know that at
60–90 days past due accounts begin to depreciate at the accelerated rate of 1/2% per day? At 180 days past due funds have depreciated to the point where only 30% on average will ever be recovered.
0 30 60 90 120 150 180 210 240 270 300 330 365
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
10%
30%
74%
95%
A G E O F A C C O U N T S IN DAYS
Source: U.S. Department of Commerce study on depreciation of accounts held in-house
Critical Depreciation Period
1/2% per day
Follow Up Early
• Be the “Squeaky Wheel”• Written request for payment
including due date and acceptable payment types
• Remind and thank them for earlier commitment
• Attach copy of previous commitment
Top 10 Ways to Improve Collections
Businesses do not always get paid for the service or product they provide.
The following steps are critical to reduce this cash flow killing problem.
Rule 1Have a Defined Credit
Collection PolicyClearly state your terms of payment
in writing for every customer.
Top 10 Ways to Improve Collections
Establish WrittenInternal Collection
Procedures• Easier when training new employees• Demonstrates importance placed on
collections• Establishes performance
benchmarks• Review and update as needed• Keep it clear and simple
Defining a Collection Policy
• Define “past-due”• Define acceptable payment
arrangements• How many written notices?• How many phone calls?• How is returned mail handled?• Do you make personal visits?
Rule 2Invoice Promptly and Send
Statements RegularlyIf you don’t have a systematic billing
system, get one.
Top 10 Ways to Improve Collections
Rule 3Use “Address Service
Requested” Post Office will research addresses of
“mail skips” and for a small cost of seventy cents they will forward the mail and in return send you a post card with the most current address on file.
Top 10 Ways to Improve Collections
Rule 4Use Your Aging Report,
Not Your FeelingsBe diplomatic, but be persistent.
Tip: Use colored paper for past-due notices
Top 10 Ways to Improve Collections
Rule 5 Contact Overdue Accounts
More FrequentlyContact late accounts every 10-15
days.
Top 10 Ways to Improve Collections
Cash Flow Improvement
“Come on, I know you’re
in there, I can see your eye
through the peep-hole!
Rule 6Make Sure Your Staff Is Trained• Even experienced staff can become
jaded• Firm but courteous is the key • Staff must “sell” concept to clients
that they should pay what is owed
Top 10 Ways to Improve Collections
Collecting by Phone
• When to start calling• Goal: Payment in full with 1 call• Track days/times of calls• Getting past the gatekeeper• Set goals of # of calls• Mental Attitude – expect success• Ask for payment TODAY (credit cards)
Communicating by Phone
• Make a connection with Debtor• Actively listen for clues for motivation• Speak clearly and energetically• Have objective in mind• Know the next step – be prepared• “It’s my policy that…• Take good notes (just in case)
Positive vs. Negative Communications
• I know you expected quality work delivered on time…
• I know you have responsibilities as we all do…
• This will cost you more if I have to take further action…
• I don’t care about your problems…
How to Ask For Money
Asking For Money is A 3-Step Process
Step One – SympathizeShow compassion, “I know how that happens sometimes”
This diffuses any possible anger and catches them off guard.
How to Ask For Money
Asking For Money is A 3-Step Process
Step Two – Restate the Obligation
“Mr. Smith, your account was due on m/d/y.”
This should cause some guilt on their behalf as well as have them realize you are “right” in asking to be paid.
How to Ask For MoneyDo Not Ask
•How much can you pay?
•When can you pay?
•Can you pay something?
Note: This gives control of the conversation to the debtor, enabling them to give unreasonable answers
How to Ask For MoneyAsking For Money is A 3-Step
Process
Step Three – “How Much Are You Short?”
“Mr. Smith, of the $200 that is due, how much are you short?”
1. If can pay some now, then give finite time to pay balance.
2. If short whole amount, you are still in control of payment terms.
Rule 7Admit and Correct Any Mistakes On Your Part• Customers realize that “to err is
human”• They will appreciate prompt and
courteous action when an oversight is caught
• Beware: Do not try and cover up mistakes!
Top 10 Ways to Improve Collections
Rule 8Follow the Collection Laws in
Your State• No public advertising of the debt• No calling at odd hours, threats, etc
Top 10 Ways to Improve Collections
Cash Flow Improvement
“DON’T TELL ME YOU
FORGOT TO PAY THE
MARRIAGE BUREAU TOO!!
Rule 9Use a third party sooner
• After 90 days, in-house efforts are more expensive and less effective
• Third party demands motivate customers
Top 10 Ways to Improve Collections
Remember this slide?
0 30 60 90 120 150 180 210 240 270 300 330 365
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
10%
30%
74%
95%
A G E O F A C C O U N T S IN DAYS
Source: U.S. Department of Commerce study on depreciation of accounts held in-house
Critical Depreciation Period
1/2% per day
When to Seek a 3rd Party• According to written policies/procedures• Broken promises – “check is in the mail”• Unable to reach by phone (voicemail, in
a meeting, answering service, etc.)• Disconnected Phone or Number
changed to unlisted• Missed Payments, Payments getting
smaller
When to Seek a 3rd Party – cont’d
• Certified mail returned “Unclaimed”• Admission of inability to pay• Debtor says “You’ll get paid when I
get paid”• Bounced Check and no response• Disputed Balance, disputed quality
of service or product
What to look for in a collection agency
• Licensed, bonded insured
• All terms in writing• References available• Reputable• Experienced in your
industry• Hold Harmless
Agreement• Performance
Guarantee
• Nationwide coverage• Pricing (flat fee vs.
percentage)• Status Reports• Personal account
representative• Soft or hard
collections at your direction
• Electronic account submission and updates
Rule 10Nobody Collects Every Account• Even with a good billing and
collection policy, a few accounts will never be collected
• A consistent collection process will diminish the number of slow and non pay accounts, and that’s a victory in itself!
Top 10 Ways to Improve Collections
Cash Flow Improvement“It may seem
we’re sinking
deeper into debt, but
really we’re just
experiencing a quarter of negative
growth.”
Collections:What’s Your Legal IQ?
True or False #1An account must be at least 90 days
past due before sending to collections.
FALSE
Collections:What’s Your Legal IQ?True or False #2
You must inform debtors before turning their account over to a
collection agency.
FALSE
Collections:What’s Your Legal IQ?
True or False #3You cannot speak to a debtor’s
spouse regarding the debt.
FALSE
Collections:What’s Your Legal IQ?True or False #4
As long as a debtor pays $1 per month, you cannot turn their account over to collections.
FALSE
Collections:What’s Your Legal IQ?
True or False #5If a check is marked “Payment In Full” you can simply scratch it out.
FALSE
Collections:What’s Your Legal IQ?True or False #6
Even if you never use a collection agency, you can threaten turning
the debtor over anyway.
FALSE
Cash Flow Improvement
Cash Flow Improvement
Loan
Manager
Top Related