3 Simple Tips for More Effective Commercial and B2B Debt Collections!

As discussed in a previous post, it is crucial to take action on your aging commercial and business-to-business accounts receivable as soon as possible. Immediately after an account becomes past due, either your own staff or your partner in commercial collections should be attempting to obtain payment in full. But what can you do to increase your odds of successful recovery? And what strategies can you take to minimize your bad debt and costly write-offs? Here are three tips for more effective commercial and B2B collections:

Tip #1: Provide Easy to Understand Billing Statements and Invoices

We commonly say that the best way to reduce bad debt is to avoid it all together. One quick and easy way businesses can drastically minimize unpaid accounts is to give their billing statements and invoices a face-lift. The information you provide in these documents actually can play a large role in determining the number of accounts that go unpaid. For example, make sure your company’s contact information and payment options are clearly visible and provided on all billing statements and invoices. After all, what good is asking a business to pay you, if they don’t know how to do it in the first place? If you ask that businesses pay via check, make sure to include your company’s mailing address. If you offer an online payment option, make sure to include the URL to your website or online payment portal. Or if you prefer businesses pay by phone, don’t forget to provide your company’s phone number and hours of operation. It seems simple, but we see far too often companies that fail to include this information in their billing statements or invoices.

Lastly, always include a clear explanation of the charges a business is responsible for paying. Describe the services rendered or the details of the unsettled debt and then of course include the amount owed and the payment due date. By including all of this critical information, you will ensure your business partners and customers will always know how much they owe, what date they are expected to pay by, and most importantly, how to submit payment.

Tip #2: Implement a Consistent and Persistent Collection Policy.

Does your business have a clear accounts receivable management strategy? What action is taken the day after an account becomes past due? How about the day before the account becomes past due? What do you do after 30 days? Or 60? We suggest sending payment reminders and making collection calls at all of these intervals. Then once an account is delinquent for over 60 or 90 days (depending on your collection approach and A/R management policies) we highly recommend outsourcing the debt to a 3rd party commercial collection agency. Continuing to take the same actions over and over for a longer period of time usually works against you. Also do you charge a fee for late payments? How much do you feel is both appropriate and effective for avoiding slow payers? The important thing is to follow a consistent policy for all delinquent accounts. This will not only set clear procedures and expectations for your collection staff, but for your business partners and customers as well.

Tip #3: Don’t Hesitate to Offer Payment Plans

Obviously you would always like to collect your accounts receivable on time and in full. But in today’s still-lagging economy, with bad debt on the rise, you will likely need to be a little flexible when it comes to payment arrangements. Give businesses the option to settle their accounts in weekly or monthly payments if they are struggling to pay in full all at once. Other common B2B payment arrangements are installment plans, deferred payment agreements, or partial payments. Yes, these sorts of payment plans do take time and you may not be paid as quickly as you’d like, but they are great techniques for maintaining positive business relationships and ensuring that you are eventually paid in full.

The information provided in this article does not constitute legal advice and is intended for educational purposes only. © 2015 Hunter Warfield, Inc. All Rights Reserved.
 
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