While every company would like to have their invoices paid when due, that ideal is rarely achieved with all customers all of the time. Inevitably there will be times when a company will have to take steps to collect outstanding receivables. Collecting overdue accounts requires a balancing act of getting the payment while maintaining a good customer relationship. Success is more likely when the owner/manager develops guidelines for the collection process, including specific goals such as the minimum funds that must be collected if a payment schedule is required and the time frame that will be allowed.

As a company's first step is usually to telephone the customer to request payment, be sure you know how to get positive results with these calls. Here are some tips that can help you and your employees collect outstanding receivables as well as retain customers that may be in arrears because of miscommunications or short-term cash flow problems.

• Keep in mind that a delinquent account could be a sign of dissatisfaction. Check the customer's account history. Are any orders currently in processing? Has the customer made complaints and have these been dealt with? Has the company taken any previous actions on this account?
• When a customer says the account cannot be paid at this time, listen and find out why. Do not suggest a payment plan before you understand the customer's reasons for not paying and their suggested remedy. A good collector listens to the solution being offered and turns it to the company's advantage.
• When a customer quickly affirms that the account will be paid shortly, it could be a tactic for dismissing the unpleasant call. When you hear yes, ask for specific details and write them down - date, amount, and means of payment. Then repeat this information back to the customer to be sure that the commitment is clearly understood by both parties.
• Make sure that the person to whom you are speaking has the authority to make decisions.
• Although the goal is to collect the total amount owing, sometimes it may be necessary to negotiate repayment over a period of time. Remain neutral when the customer suggests various payment plans and listen carefully to what they are prepared to do. In working out a mutually satisfactory arrangement, start by requesting a higher amount than your bottom line of an acceptable partial payment.
• In some cases, you may wish to consider writing off the interest or penalty on the past due amount to encourage the customer to get the account in good standing as soon as possible. In other cases, you may wish to consider providing products or services on a C.O.D. basis until the outstanding account is paid.
• Avoid heavy-handed threats.

Negotiating collections from customers requires a firm business-like approach that lets them know that your business is willing to resolve the outstanding amounts in a serious and dignified manner. When making those collection calls, remember that being confident, considerate, and flexible can increase your success rate on collections.

The above provides general information only. It should not be regarded or relied upon as accounting or taxation advice or opinions. Logan Katz LLPChartered Accountants would be pleased to provide more information or specific advice on matters of interest to you.

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