Purchasing Resources for Accounts Receivable

Improving Your Collections

Better invoices, dunning letters and agencies can help you collect more cash
By Daniel Kehrer, Founder & CEO BizBest Media Corp. In today's troubled economy, late or unpaid invoices are a fact of life for any business that doesn't collect in full upfront. But there's much a business can do to head off trouble before it starts, or to speed up payments. The key is to create a clear collections process at your business. It starts by making smart credit-granting decisions in the first place.
 

"But I don't grant credit!" you may protest. Yet anytime you deliver a product or service without first collecting payment you are, in fact, granting credit. If you are ever at risk of not being paid, you are — like it or not — a creditor. These five keys to better collections can help you get started:

1. Make your invoicing quick and professional
2. Check credit of major customers ahead of a sale
3. Write customized, personal dunning letters
4. Offer incentives for quick payment
5. Get on the phone with late payers

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Use invoicing software or web-based billing services for a professional look

Crack collections require a buttoned-down invoicing system that's now easier than ever thanks to invoicing software and online invoicing services for small business owners.
Try: Two standout services that help you create, send and manage invoices easily online are FreshBooks and Bill.com.  MyInvoices & Estimates is a low-cost software package from Avanquest that helps you create professional-looking estimates, invoices and statements from your own PCs. QuickBooks online also has invoicing features.

Outsource for credit and collection services

D&B Small Business Solutions delivers a variety of debt collection services, including demand letters.
Try: D&B's debt collection services can help you collect money owed to you without alienating customers. Or hire your own outside collections department through an affiliate of the National Association of Credit Management. Search by city and state for a provider in your area.

Make your demand letter a grabber

Get online help writing a dynamic dunning letter that will produce quick results.
Try: Business Letter Templates can help you write a good collections letter. WriteExpress has excellent tips and letter templates as well. The DunsDemand Letter is an effective "wake up call" for slow payers and will result in a "Placed for Collection" notice in the debtor's D&B business credit file.

Plug into business credit reports

Checking business credit can save you time, money and help you make a more sound and informed credit decision.
Try: The National Association of Credit Management has affiliates across the country that can provide a wide range of credit reports on businesses large and small as well as business owners and foreign firms. Find a supplier in your area at the NACM site.

Summon the collection cavalry while there's still time

Each passing month dramatically reduces your chances of getting paid. Consider bringing in a collection agency after 90 days.
Try: ACA International can help you find a collection agency, attorney or other professional in your area. Commercial Collection Agency Association members are the only group of agencies certified by the Commercial Law League of America.

• Your invoice should be clear and simple. It should state explicitly, in itemized fashion, what it is for. Fancy colors or cute designs detract from the purpose. Online services mentioned above will get you a clean, professional look.
• Send a real invoice, not stationery with "amount due" typed in. Make it clear what business name the check should be made out to, and where it should be sent. Include a phone number for questions.
• Missing or confusing information offers an excuse for delay.
• Send invoices the moment money is due. If payment isn't received by the stated deadline (30 days, for example), send a reminder on day 31, not the next cycle.
• If you undertake a long-term project, consider progress billings.
• Request credit references from customers, make inquiries yourself, buy commercial reports (from D&B for example), or combine all three.
• The better your collection letter, the faster the money will flow. Make it a customized, personal letter, not a lifeless form letter. Remind the debtor of his or her original promise to pay. And ask for immediate and full payment (obvious, but often left out).