Managing accounts receivable collections can be overwhelming because minor mistakes can result in costly disasters. Unorganized practices and poor habits can lead to chronic issues that directly impact an organization’s revenue and profits. Here are the most common account receivable collections mistakes and how to avoid them.

Preventable Procrastination

The time to check in with customers regarding overdue payments is well before the end of the term date. Invoices that are not consistently unpaid are a warning sign of potential collection problems. It’s easy to remain in contact with customers by sending out friendly, weekly updates. This will remind them of upcoming due dates and help everyone remain on the same page. A 30-day term may receive a collections email or phone call after the first 10 days. Another email with notification to sales and management is appropriate after 20 days. A certified letter may be sent to follow-up before the matter is turned over to the collections department.

Weak Credit Checks

Many new companies rack up bad debt because they accept customers with limited assurance that they will pay their bills on time. Extending credit to all potential customers is not a good practice, so there should be policies and procedures in place to minimize these risks. First, consider requiring new and returning customers to fill out a credit application to help you check references and credit histories. Second, regularly review current credit sales and credit collection policies and deliverables. A credit check policy is only as good as the enforcement by management. Mutual meetings between sales, accounting, and customer service may help.

Ideally, the accounting software will have a dashboard for receivables management that will help everyone with monitoring operations. Real-time accounting data will provide managers with the information needed to better understand the current state and progress toward achieving organizational goals. Some of the most important metrics include the average days to pay, time to receive payment and percent of overdues. Contact us so that we can help you minimize the number of delinquent accounts and collection activities.