- A written policy for extending credit
- A collection policy
Finally, you must scrupulously follow your credit extension and collection policies.
To formulate your policies, enlist the help of your accountant, tax adviser or attorney. Questions for you to answer include:
- What are the terms of credit extended?
- What are the terms of payment?
- What rate of interest will be charged?
- What are the consequences if your client doesn’t pay?
- What will you do to hedge your position if they don’t pay?
- Remember that, in all interactions with your client, it’s a business relationship.
- INFORMATION IS PARAMOUNT. The more demographic information you have about your clients, the easier it is to collect from them.
- Educate your clients. Make sure that they know what your payment terms are and when you expect to be paid.
- Update a client’s demographic information at each contact you have with them.
- Send out your bills promptly.
- Treat all people with respect.
Remember that accounts 60 days or less past due are highly collectible. Accounts that are 90-plus days past due become increasingly difficult to collect. Devise a solid plan to internally work those accounts 60 days and under. By focusing on your in-house efforts to tackle these, you’ll maximize your recovery.For those accounts that are over 60 days past due, call on your collection agency for help. You’ll save much more time doing so, and your collection agency will prove far more successful on these problem accounts than you will internally.