Indianapolis CPA Discusses:  How To Improve Your Receivables Collection System

Having a consistent process in place to speed up collections – past due payments owed to by customers – is very important for any small business owner to make a priority.

There are too many businesses that wait for the problem to get out of hand, and even continuously lose hundreds or thousands of dollars from not having these types of systems in place.

And in fact, I have found that when owners finally decide to take these systems seriously, it has been one of the most notable ways to improve the overall health and cash flow of a business.

So then, what does this system look like?

The truth is, there is no real secret to it, but the business owner should make the process as painless as possible, while also making sure that the necessary attention is given to those top customers who require a little more attention.

So for example, my collection process consists of the following three steps:

  1. When my office manager prints off these AR balances from our accounting system, she brings them to me so that I can highlight the substantial past due balances with my own discretion – typically at a certain number of days past due – and then we can apply a finance charge and statement fee to those balances in our system.
  2. Once I have made the highlights, the manager prints these statements with the necessary charges applied, and we send these statements off in the mail the next day.  This takes place approximately on the 6th or 7th of each month.
  3. And about 2 days after the statements have been mailed out, the office manager follows up on these accounts with a phone call as well

Of course, every collection system does not have to work exactly as mine does, but what’s important is that every small business owner understands a sale is not a sale until the payment has been made.

And in order to make this a priority, it should be built into the sales process so that periodically these amounts are being accounted for, and a significant amount of cash is not falling through the cracks.