establishing good billing practices to avoid collection headaches
Post on 17-Jul-2015
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Establishing Good Billing Practices to Avoid Collection HeadachesIn this chapter:
Getting prompt payment through effective billing practicesKeeping your billing practices organizedTraining employees on billing procedures
Billing practices are part of your customer relationships from the time they fill out their credit application.
Good billing practices help you avoid conflict, avoid and overcome customer arguments, and collect delinquent accounts.Components of a Well-Run Accounting and Billing operation
2. Is a visual guide of customers that are not paying all of their bills on time. It contains the following:
3. Interest charges for late paymentsCharging interest on delinquent accounts, can help prompt your customer to want to pay your bills before interest starts to accrue. You should disclose interest charges in your purchase contracts or credit applications.
Setting Up an Effective Billing System
An effective billing system requires the following: Purchase orders: Providing the order was placedInvoices: Obtaining payment through effective invoicing Delivery receipts: Establishing proof the product was receivedCredit and debit memos: Documenting changes in the balance owedChange orders: Putting modification of the agreement in writing Statement of account: Sending monthly statements as a regular reminder to paySetting Up an Effective Billing SystemPurchase Orders are documents that your customer ordered your product or service.Invoices are the bill for the product or services rendered by your company to your customer. Delivery receipts are provided by carriers such as trucking companies that deliver your goods to your customers.Setting Up an Effective Billing SystemCredit & Debit MemosCredit memo - is issued by you to document products or services that you provided to your customer but that were not received or were rejected or returned.Debit memo is typically issued when the customer fails to pay an invoice or pays less than the entire amount that is due.
Credit memo Debit memo
Change orders are important to document price increases, changes in materials, services or other changes affecting price and the balances due from the customers.A customers statement of account is a running ledger of the customers credit transactions, including all payments, payments, debits and credits.It is a summary of your transactions with your customers over the course of billing period (usually in 30 days).Statements of AccountHow can I pay you, when you havent even billed me yet?I never pay without a billI need something in writing
Creating an effective billing systemMaintaining precise recordsMaking sure your forms dont conflict with each otherKeep key records, like customer checksSidestepping billing discrepancies by putting everything in writing
Keeping Your Bills Accurate
Getting Bad Accounts Off the Books:You Gotta Know When to Fold EmIf the customer has been turned over for collection, the collection agencies make demands for payment using their own letters to pay the debt.If a debtor files for bankruptcy and the debt is being handled by the bankruptcy court, you may be in violation of the bankruptcy law if you still send bills and notices to the debtor.
Training Your Staff in Billing MattersInputting data accuratelyUsing the correct formsRespecting confidential and sensitive data
Spotting and Reacting to Changes in HabitIn this chapter:
Setting controls to maintain cash flowAvoiding payment slowdownsDealing with customers excuses for slow paymentHandling changes in customers payment behaviorTracking down elusive customersChapter 5General Controls for Keeping Your Cash Flow SteadyBe aware of slowing paymentsBe ready to respond to customers bad habitsBe considerate, yet firmBe prepared to reduce a line of credit, require (COD) cash on credit or cut off deliveries or servicesBe honest in your communications
Tailoring Your Strategy: A Short Leash for New CustomersSetting tighter controls for newer customersPut the customer on a short leash, such as a 15-day watch list, so you detect a slowdown in payments almost immediately.Be ready to turn off the credit faucet: No credit if no payment.Hold up further deliveries of your goods or services until the customer pay his late invoices.Get additional assurance of payment, such as liens, guarantees, and promissory notes.
Tailoring Your Strategy: A Short Leash for New Customers (continued)B. Helping out timely payersExtending their payment terms ( for example , payments due in 45 days instead of 30).Forgiving some service charges on the accountOffering a discount for early payment
Spotting Trends and Patterns of PaymentKeeping an eye (and ear) on your customerMonitoring industry trends and bracing for slowdownsSpeeding up slow payersStarting with a letterFollowing up with a phone callReacting to customers excuses, bad habits, and broken promisesSpotting Dubious ChangesChanges in ownership of a client businessChanges of address or phone numberChanges in order volumeA decline in orders often precedes a decline in payment diligence.An unexpected increase in ordersChanges in financial situationChanges in customer attitudeChanges your customers understanding of purchase or credit terms
Dealing with Elusive CustomerBreaking free from voice mail jailDetouring around the disconnected phoneShowing up on the debtors doorstepE-mailingFaxingTexting
Elusion is a definite red flag. Put the customer at the top of your list for monitoring payments and exercise extreme caution when considering any further extensions of credit.
Dealing with Elusive Customer
When Your Late-Paying Customer Turns into Your Debtor In this chapter:
Creating a sense of urgency for paymentsUsing frequent payment reminders effectivelyEstablishing a good paper trailChapter 7
Creating an Atmosphere of UrgencyInterest and penaltiesAttention getting words and big red lettersFrequent remindersMultiple of modes of contactMaking a phone call
Communicating Effective Reminders to PayWriting effective collection lettersKeep it shortUse simple words, short sentences and paragraphsCustomize the letterDemand payment by a specific dateSpecial concerns for consumer debtorsStill not paid? Escalating your approachCustomizing your notification approachDont forget the power of a phone callDocumenting the File: Having Good Notes When You Need ThemYour customers entire credit fileNotes of phone calls made or received, along with dates and responsesNotes made by employees of your companyCopies of all follow-up statementsCopies of all demand letters and follow up correspondence
Documenting the File: Having Good Notes When You Need ThemThe paper trail: How good records help you both in and out of courtAnticipating reactions: Playing devils advocatePursuing written admissions of the debt
A rule to live by; He who has the most paper wins