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Accounts Receivable Solutions Dos and Don’ts

by Erica Nelson on October 30, 2014

Accounts Receivable Solutions Dos and Don'ts

Collecting past due invoices is often challenging as there can be many reasons a company has not paid their bill. To ease your collection efforts, there are a few basic accounts receivable solutions to consider:

Don’t Procrastinate on Collections

When considering accounts receivable solutions, collections efforts can actually begin right after you ship a product (or provide a service or complete a project) to another business. This is a good idea if you have any reason to believe a client may be delinquent in paying an invoice. Contact the client shortly after you anticipate the company will receive delivery or after the service or project has been completed. See the call as a customer service  opportunity to thoughtfully check in about their satisfaction, as well as the chance to remind them about payment terms. This is one way to improve your cash flow but, it also helps you build a better relationship with your clients.

Do Document Carefully

When managing your accounts receivable, make sure you are careful about documenting all collection communications. You should include notes indicating dates of all calls including any follow-up in the event the debt is not paid in a timely manner. For most businesses, it is tempting to simply call and state a bill is past due. After all, none of us wants to spend valuable time chasing money we’re owed. However, it is important to keep in mind, the more persistent you are with your collection activities, the more successful you are likely to be. Ensure your collections methods are deliberate (i.e., using the appropriate language), strategic (i.e., the right kinds of contact at the right times), and consistent with lawful collection practices. Remember, if you ask the right questions during the collection call such as “when can we expect payment” you have a “built-in” reason for a follow up call.

Do Offer Alternatives

It should go without saying, but make sure you offer a few different methods of payment. This will often give the company incentive to pay sooner rather than later. Once a company has agreed on a payment arrangement for a past-due invoice, make note of the arrangement and if you feel it is appropriate, follow up with a letter or email detailing the arrangement.

Don’t Harass or Threaten

Keep in mind, it is important to understand the limitations of what you may say during conversations or written communications regarding debt collection. Under the limits of the Fair Debt Collection Practices Act, you must be cautious about the language you use when collecting a debt. All debt collection efforts should be professional and non-threatening to your business partners. Remember, if you have worked out a payment arrangement, don’t hesitate to follow up if payment is not made as agreed.

It is important to avoid harassing a company when they have a past due invoice. One of the most challenging aspects of collections is ensuring you do not cross the line between a demand and a threat. Keep all communications civil but firm. Ultimately, most of us have a single goal: collecting the money due while preserving (and, ideally, strengthening) the relationship with the client.

Getting to the bottom of the reasons behind non-payment may be the first step in ensuring unpaid invoices do not turn into collection nightmares. No one is comfortable with the idea of having to chase our business partners for past due bills. However, collections are a necessary part of managing your cash flow. In some cases, a collection effort may occur simply because an invoice was misplaced. Unfortunately, in other cases, your business partner may be suffering from a cash-flow problem and it could be helpful for you to get that information sooner rather than later. If your efforts to collect on your own are not successful, you may want to consider partnering with an agency. At D&S, we differentiate ourselves by providing a variety of account receivable recovery service solutions. Reach out to us with questions about how we can help support and augment the efforts of your business, manage your cash flow, and improve your relationship with your clients.

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"To be distinguished as the uncontested premiere world-wide service provider for Accounts Receivables solutions. The standard of excellence all others seek to achieve."

Lonnie Larson, CEO, D&S Global Solutions