Wisdom From the Road
Through my travels, a common question arises. Clients ask me what they can do to minimize write-offs and improve recoveries.
The answer to this question is simple but all too often I see that people aren’t doing what they already know how to do. Follow your credit policy concerning aged accounts. As unpaid accounts age, internal treatment levels gain more frequency and build to a crescendo of urgency. That crescendo should occur in the range of 60 to 90 days past due. As you reach the crescendo, the customer receives a final demand. If the customer doesn’t pay from a final demand, it’s time to move the account out. That’s it. Simple!
If it’s that simple, why do agings swell? One of the biggest issues I see is that management lays out a policy and doesn’t implement a procedure that supports the policy. Too often, the line employees who are supposed to follow the policy undermine it with their interpretation of what they think you want. Make sure you have a strong system in place that ensures your policy is followed.
Think your present policies and systems are “tight”? Spot check your aging. If you have a weak process around your aging review, you will see aged accounts that are holding on by the excuses they give your collectors.
Spending resources chasing marginal customers that are already aged past 90 days takes away from your team’s ability to cover more current accounts and to keep those fresher accounts from aging past due. Chances are your collection resources are already tight so make sure you use your people’s time wisely.
Worried you’ll end up sending more accounts to collections? I don’t give that premise very good odds. The more you do up front to collect accounts, the fewer accounts you’ll have that ever reach 90 days. If your policy is flawed, you’ll fix it and you’ll see your internal recoveries surge and your 3rd party placements diminish!
Jim Fritz can be reached at 763 315 9631 or at email@example.com.