Minimizing The Need For Accounts Receivable Collections

Any business that sells on credit could have non-paying customers. Yet you can adopt internal policies that minimize them. This article will discuss some simple but effective credit policies that help you avoid the need for accounts receivable collections.

Policies That Minimize The Need For Accounts Receivable Collections

Here are some important policies you can adopt, each of which we’ll discuss fully in a separate article:

1. 1. Vet New Customers Before Extending Credit
      Use information sources like credit applications and business credit reports to make informed decisions about new customers.

   2. Have Clear Terms
      Use clear language to define when payment is due, the consequences of nonpayment and a forum clause requiring that any litigation take place in New Jersey.

   3. Paper Each Order Properly
      Properly paper each sale to satisfy any written contract requirements, avoid costly disputes and errors, and serve as evidence if you ever need to litigate.

   4. Invoice Quickly And Clearly
      Bill right after you’ve provided the goods or services.  Make sure your invoices are clear, itemized and accurate.

   5. Motivate The Customer To Pay
      Charge interest on past-due invoices and attorney fees if you go to accounts receivable collections.  Make it more expensive for the customer not to pay you.  And where you can, get a personal guarantee.

   6. Motivate The Customer To Pay Early
      Offer a discount for early payment.  For example, if your terms are 30 days, maybe offer a discount if your customer pays in 15.

In accounts receivable collections, prevention is the best medicine.  Adopting these policies should help you avoid non-paying customers, thus minimizing collection headaches and maximizing your profits.

For more information on collecting receivables, or if you’d like to discuss a specific collection issue, call me at 856-667-1669 or contact me here.

This material is for informational purposes only and should not be construed as legal advice.  No person should rely on this information without seeking the advice of an attorney.