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Establishing Good Billing Practices to Avoid Collection HeadachesIn this chapter:
•Getting prompt payment through effective billing practices
•Keeping your billing practices organized
•Training employees on billing procedures
Chapter 4
1.
a) Billing practices are part of your customer relationships from
the time they fill out their credit application.
b) Good billing practices help you avoid conflict, avoid and
overcome customer arguments, and collect delinquent accounts.
Components of a Well-RunAccounting and Billing operation
2.
Is a visual guide of customers that are not paying
all of their bills on time. It contains the following:
3. Interest charges for late payments
• Charging interest on delinquent accounts, can
help prompt your customer to want to pay your
bills before interest starts to accrue.
• You should disclose interest charges in your
purchase contracts or credit applications.
Purchase orders: Providing the order was placed
Invoices: Obtaining payment through effective invoicing
Delivery receipts: Establishing proof the product was received
Credit and debit memos: Documenting changes in the balance owed
Change orders: Putting modification of the agreement in writing
Statement of account: Sending monthly statements as a regular reminder to pay
Setting Up an Effective Billing System
Purchase Orders are documents that your customer ordered your product or service.
Invoices are the bill for the product or servicesrendered by your company to your customer.
Delivery receipts are provided by carriers such as trucking companies that deliver your goods to your customers.
Setting Up an Effective Billing System
Credit & Debit Memos
• Credit memo - is issued by you to document products or services that you provided to your customer but that were not received or were rejected or returned.
• Debit memo – is typically issued when the customer fails to pay an invoice or pays less than the entire amount that is due.
Change Orders
Change orders are important to document price increases, changes in materials, services or other changes affecting price and the balances due from the customers.
• A customer’s statement of account is a running ledger of the customers credit transactions, including all payments, payments, debits and credits.
• It is a summary of your transactions with your customers over the course of billing period (usually in 30 days).
Statements of Account
“How can I pay you, when you haven’t even billed me yet?”
“I never pay without a bill”
“I need something in writing”
Creating an effective billing system
Maintaining precise recordsMaking sure your forms don’t conflict with each other
Keep key records, like customer checks
Sidestepping billing discrepancies by putting everything in writing
Keeping Your Bills Accurate
Getting Bad Accounts Off the Books:You Gotta Know When to Fold ‘Em
• If the customer has been turned over for collection, the collection agencies make demands for payment using their own letters to pay the debt.
• If a debtor files for bankruptcy and the debt is being handled by the bankruptcy court, you may be in violation of the bankruptcy law if you still send bills and notices to the debtor.
Training Your Staff in Billing Matters
Inputting data accurately
Using the correct forms
Respecting confidential and sensitive data
Spotting and Reacting to Changes in Habit
In this chapter:
•Setting controls to maintain cash flow
•Avoiding payment slowdowns
•Dealing with customers’ excuses for slow payment
•Handling changes in customers’ payment behavior
•Tracking down elusive customers
Chapter 5
General Controls for Keeping Your Cash Flow Steady
Be aware of slowing payments
Be ready to respond to customers bad habits
Be considerate, yet firm
Be prepared to reduce a line of credit, require (COD) cash on credit or cut off deliveries or services
Be honest in your
communications
Tailoring Your Strategy: A Short Leash for New Customers
A. Setting tighter controls for newer customersPut the customer on a short leash, such as a 15-day watch
list, so you detect a slowdown in payments almost immediately.
Be ready to turn off the credit faucet: No credit if no payment.
Hold up further deliveries of your goods or services until the customer pay his late invoices.
Get additional assurance of payment, such as liens, guarantees, and promissory notes.
Tailoring Your Strategy: A Short Leash for New Customers (continued)
B. Helping out timely payersExtending their payment terms ( for example , payments
due in 45 days instead of 30).
Forgiving some service charges on the account
Offering a discount for early payment
Spotting Trends and Patterns of Payment
Keeping an eye (and ear) on your customer
Monitoring industry trends and bracing for slowdowns
Speeding up slow payers
• Starting with a letter
• Following up with a phone call
Reacting to customers’ excuses, bad habits, and broken promises
Spotting Dubious ChangesChanges in ownership of a client business
Changes of address or phone number
Changes in order volume• A decline in orders often precedes a decline in payment
diligence.
• An unexpected increase in orders
Changes in financial situation
Changes in customer attitude
Changes your customer’s understanding of purchase or credit terms
Dealing with Elusive Customer1) Breaking free from voice mail jail
2) Detouring around the disconnected phone Showing up on the debtor’s doorstep
E-mailing
Faxing
Texting
Elusion is a definite red flag. Put the customer at the top of your list for monitoring payments and exercise extreme caution when considering any further extensions of credit.
When Your Late-Paying Customer Turns into Your Debtor
In this chapter:
•Creating a sense of urgency for payments
•Using frequent payment reminders effectively
•Establishing a good paper trail
Chapter 7
Creating an Atmosphere of UrgencyInterest and penalties
Attention getting words and “big red letters”
Frequent reminders
Multiple of modes of contact
Making a phone call
Communicating Effective Reminders to Pay
Writing effective collection letters
• Keep it short
• Use simple words, short sentences and paragraphs
• Customize the letter
• Demand payment by a specific date
Special concerns for consumer debtors
Still not paid? Escalating your approach
Customizing your notification approach
Don’t forget the power of a phone call
Documenting the File: Having Good Notes When You Need Them
Your customer’s entire credit file
Notes of phone calls made or received, along with dates and responses
Notes made by employees of your company
Copies of all follow-up statements
Copies of all demand letters and follow up correspondence
Documenting the File: Having Good Notes When You Need Them
1) The paper trail: How good records help you both in and out of court
2) Anticipating reactions: Playing devil’s advocate
3) Pursuing written admissions of the debt