Saturday, July 20th, 2019

Getting Paid, Part 2: Delinquent Accounts

By Chris Green on Jan 03 2010 • Filed under Chris Green's Legal Basics

Judging from the response to my last column, the problem of collecting on accounts receivable continues to be a thorn in the side of many businesses, so by popular demand, here are a few more thoughts on the topic. 

The starting point for any accounts receivable recovery strategy has to be timely and accurate record keeping. All of the major accounting software packages contain an accounts receivable module, so there really is no excuse for not having an up-to-the-minute print out of who owes you money.Make it a point to print and review an aged accounts receivable list frequently and, if you have staff, share the information with them as well. 

For reasons I've never been able to fully understand, many entrepreneurs are shy about actually rendering their accounts, thus creating a hidden accounts receivable problem. Let's face it, your customers are never going to chase you to pay their account; they will be quite content to see your ongoing work for them languishing as work in-progress. Set aside some time each month to do your billing. Make it a habit. 

Always remember that time worn adage "the squeaky wheel gets the grease." Make yourself become that squeaky wheel. If your payment terms are 15 days net, be on the phone to your customer on day 15, and follow up relentlessly. Again, there is plenty of software available to help you keep a diary of, and systematize, your follow-up efforts. Record every contact you have, and what excuses were made the last time you phoned, and let your customer know you are making note of their little fibs. 

Many of us find it difficult to ask for money from our clients. Well, in part, it is just one of the distasteful chores we, as self-employed business owners, have to learn to do. But consider that many business gurus preach that you should hone your strengths, and outsource your weaknesses. So, if you go weak in the knees at the thought of dunning a client for money, get somebody else to do it for you! You may well find that your spouse or your assistant will have little compunction at picking up the phone to chase the money.  

Ultimately, you can get a collection agency or a lawyer to do your talking for you, but that can get expensive, so you want to have a collections procedure in place to nudge all but the really hardcore non-payers into eventually paying their account, before you resort to drastic measures. Sometimes reminder chits sent via mail or email will do the trick, before you get to the stage of a phone call. Some companies use a graduated series of reminder letters, from mild to fierce, before consigning the debt to the debt collectors. 

Not all collection agencies are obnoxious. Many pride themselves on extracting payment while still maintaining the goodwill of the debtor, so, if client retention is important to you, shop around to make sure you and your collection agency are a good fit for each other. Credit agencies charge less, and have far better results, when they are chasing fresh blood. Letting your receivable list fester for a year and then turning it over to the collector is not a good idea.  

One hears stories of frustrated creditors enlisting the help of biker gangs, or sometimes directly threatening their delinquent customers with physical violence, in an attempt to collect. These tactics are seriously, seriously flawed, and are guaranteed to blow up in the hapless business owners face. Just don't do it . Don't even think about doing it; and never, ever talk about doing it, even in jest.  

So, in summary, successful accounts receivable management is mainly a matter of organization and perseverance.


1 Comment

  1. Darn, no more threatening to break their legs!

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