Credit & Collections Management
Collecting from your large customers: Is it 'Collections' or 'Corrections'?
Sharma Ramdular
Training and Program Director
Credit Guru Inc. - CreditGuru.com
Email: edu@creditguru.com
A few years ago I was at a major railroad company for imparting training sessions on the topic of Collection Skills and Receivable Management. On the first day of training a, I realized that the collections staff was made up of people who had a significant number of years of collections experience. The group was an enthusiastic batch; however most of the proven collections techniques were being met with “we can’t use those approaches here”. As one of the collections staff mentioned, “we don’t do collections here, we do CORRECTIONS” since 80% of their time was spent on reconciling accounts and correcting errors.
Dealing with large accounts in general, creates huge challenges for an A/R department. Multiple invoices leads to missing invoices, pricing issues, delivery problems, damages, short payment and a host of other problems. Just ask any credit manager what his/her policy is on collecting from their large accounts and you will most likely hear that it is reconciling accounts, and issues they have little or no control over.
We can perhaps afford to lose a small client, but can we afford to lose a big client that adds huge dollars to our revenue stream? Our Sales Department is focused on Revenues but our Credit department concern is cash flow (aren’t we obsessed with Days Sales Outstanding (DSO)?).
The sales department ensures large accounts are happy, Management tends to supports these efforts because at the end of the day investors and the lenders focus on revenue trends. Large accounts may have overdue amounts that your collectors have been working on and trying to collect for months only to find out that the account is disputed and the customer perhaps does not even owe the amount.
Here are some points to consider when dealing with large accounts.
- Review the issues and assign a collector(s) to investigate the issues and reasons around non-payment
- Create Policies and Procedures to deal with these issues
- Realigned your system to include proper documentation and strict timelines to resolve issues.
- Encourage joint calls with salesperson to meet with purchaser.
- Have your A/R representatives meet with their counterparts from whom they are collecting.
- Foster relations with the A/P management in addition to the A/P clerk.
- A/R person must understand the accounting processes that their customers are using.
- Identify any special requirements that you or they have to meet?
- Develop systems for your collectors to gather information from your customers to understand what they want from you?
- Do an annual review on these accounts to measure success.
There is no magic solution for dealing with any account that is not paying. Here I have merely proposed dealing with large accounts as a Corrections issue in resolving Collection issues.
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