Your Checklist to an Improved Aging

Improve Aging Checklist

It can be a challenge to keep your aging clean. Credit and collection professionals have many responsibilities beyond collecting aged accounts. New customer set up, order releases, cash posting, and reconciliation are just a few of the tasks that can keep credit staff from maximizing their collection activity. Another challenge that prevents customer contact is that collection staff often have call reluctance and would rather do all those other activities as opposed to picking up the phone to collect money.

If you are going to reduce delinquency, its critical that you maximize the impact of your collectors’ time. You must recognize when they are spending too much effort chasing accounts with low odds of recovery. Investing time collecting accounts that are on the cusp of paying you is best. Your efforts produce the greatest results when you are accelerating slow paying accounts and making decisions to push serious collection problems off your aging.

The following warnings signs can help you and your staff recognize when you are dealing with time-consuming accounts with lower odds of recovery:

  • Account is 90 days past due with no payments and no recent orders. This is often a sure sign your customer has already moved on to another supplier.
  • Customer is talking about bankruptcy or going out of business. This is the last thing you want to hear and time is of the essence to get the account paid before they liquidate.
  • Customer is telling you that consultants are coming in to help run the company. You want the opposite of what the consultants want. You want your cash now and the consultants are often paid to slow the cash payments to vendors even more.
  • Discussions of obtaining financing, with no set date for funding and no follow through. A few companies are fortunate enough to get financing and pay vendors; however, most lenders aren’t willing to extend financing to your customer. Your customer is already behind with vendors and to a bank, that’s just too big a risk.
  • Disputing the entire balance, saying no intention of paying and there is no validity to their dispute. Why invest time with someone who is not being rational?
  • Non-responsiveness: customer has not returned your telephone calls. It’s easy to overlook these customers; however, don’t do it. A silent customer is really speaking volumes through their lack of communication and their lack of payment.
  • Broken promise/broken payment plan. You can only give a customer so many chances and maintain credibility. If the customer follows through, it is a great success. If they break their promises, they start consuming too much of your time.
  • Request for a discount in order to settle. We are seeing aggressive (low) offers from debt negotiators. Remember, they are just that, negotiators. If you get a low-ball offer from a debt settlement company, don’t take the bait. We routinely generate much more favorable solutions and return more net dollars to your bottom line.
  • Customer has a history of slow pay and it is getting worse. You don’t want to be the last vendor holding the bag. This requires immediate action to reverse the trend.
  • 1st order default. Any time you have an initial order that goes beyond terms, time is of the essence. Chances of recovery are strongest while the trail is fresh.
  • NSF check. Customers that bounce checks are great consumers of your time and add incremental costs to your business.

The key to reducing delinquency is having the time and ability to influence your slow paying customers to pay more quickly. That’s the best use of your staff’s time. Avoid getting caught in the trap of handling all the extremely challenging situations that come your way. For every one collection challenge you try to tackle on your own, you miss the opportunity to push five routine customers to pay now.

DSO reduction begins with sound internal processes and an action plan for managing exceptions. What value can a collection partner bring to exception management that your staff can’t? Our entire business is built around challenging AR and identifying leverage points to collect your money faster. We employ the resources to surround the problematic accounts on your aging so that you and your staff can focus on the ordinary AR issues that are ever-present. Should you find yourself needing assistance with your problem accounts, reach out to your Receivables Control associate and we’ll be happy to assist in reducing your delinquency!