At some point in your business life cycle, you’ll need to establish a collections process. Whether you’re starting out or you have a collections process in place and want to revisit it, these seven tips will help refine the process to be the best it can be.
1. Careful Review
Sometimes, the best offense is a good defense. This is certainly true when it comes to your collections process. While you may think more about how you’ll collect overdue accounts, pre-empt the need to deal with those accounts by taking some preventative measures.
Make your collections process more effective with better guidelines for approving account applications. Instead of approving everyone for credit, review customers carefully. Don’t be afraid to deny some or extend smaller credit limits. It can save you headaches later on down the line.
When you’re establishing your collections process, be sure to consider the role of automation in it. How will you generate invoices and send them out? What about reminders?
While you can’t automate every aspect of account collection, you should turn over routine tasks to the machines. This leaves your team members to deal with more important jobs.
3. Clear Communications
Another thing you should look to while you establish your collections process is communication.
Set out clear guidelines for how your collections team should communicate internally, with other departments, and with your customers. Develop template letters to send in a variety of situations to ensure your team members keep the message on brand.
4. Ask for Help
If you’ve established a collections process or you’re looking to revise one, an important factor in making it effective is knowing when to ask for a helping hand. Many business owners—especially those running small businesses—believe they have to handle everything by themselves.
You can always ask for help! It’s often easier to find the help you need than you may think. Talk to an experienced outsourcer about how they design and implement a better collections process. They can also offer you services to make things run even smoother.
5. Get out the Measuring Stick
How do you plan to measure performance once you’ve established your collections process? Accounts receivable metrics give you a better idea of how well you’re performing and where you can improve.
Keep tabs on your performance by tracking metrics such as account receivables turnover ratios and average collection period ratios. They can tell you a lot about your performance.
6. Think about Brand
Whether you’re keeping collections in-house or outsourcing services, remember to account for your brand. Few people think about branding as an important part of the collections process, but it’s essential.
No matter what you do, your process must uphold your brand values every time you interact with a customer during the collections process.
7. Maximize Potential
Once you’ve taken a look at your collections process, consider the measures you can take to encourage your customers to pay on time or even early. Think about policies such as late payment penalties and incentives such as early payment discounts.
These methods maximize the potential of your collections process.
Establishing a collections process doesn’t need to be difficult. Once you’ve reviewed these tips, try factoring some of them into your plan for the most effective process possible. And if you need a hand, don’t be afraid to ask the experts!