It’s Time to Swing Into Action With a Year-End Collections Plan

Prying the dollars from the hands of slow-paying customers can be a frustrating exercise. Try these tips to get paid now!

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Question: With year-end approaching, what are some effective strategies to collect delinquent accounts receivable? 

Answer: For most PROs, as the special event season comes to a close, end-of-year activities such as equipment inventories, updating records and policies, planning new purchases for the year ahead and, of course, collections take priority.

We have assembled an outline of ideas and suggestions we have found to be effective, whether in our business or in conversations with other PROs throughout the years. Perhaps there is an idea you may want to adopt and customize for your own business.

Goals

1. Collect delinquent account balances without writing the amounts off as bad debt expense.

2. Maintain good customer relationships while diligently working to close these aged open invoices.

3. Accomplish these goals in an organized fashion while utilizing good time management.

Organization

Depending on the size of your company and the volume of work to be done, designate a specific person or persons to work on this collections project. Consistency in personnel ensures that customer conversations will be direct and consistent with no “he said that she said” communication issues with the customer.

Create specific times for this work to be done, preferably in an uninterrupted period. Depending on the scope of work to be done, some PROs will set aside several days, an entire week or the same days over several weeks for this project. Our experience is that Mondays and Fridays are not the easiest times to reach customers, even in office environments. Also keep in mind that your year-end work also competes with the Thanksgiving, Hannukah, Christmas and New Year’s holidays. Plan your collections activities accordingly. 

Reports and working documents

Most PROs will run an accounts receivable aging report that is usually in a standard format created by the software provider. This report will list the age of open invoices in 30-day increments. Concentrating on “over 90 days” will capture the delinquent invoices. Some programs will calculate the exact number of days past due and list these totals from oldest to newest.

Another useful tip is to separate the past-due accounts by “active” and “inactive” job status. “Inactive” accounts will be the most difficult to collect since there is no current relationship with the customer on that job.

Create a call list and share this document with other administrative or operations team members. If any existing customers with delinquent balances call for pick-ups or state that their jobs will be soon ending, special emphasis can be placed on that account before it becomes “inactive.” If this situation can be reported to the accounts receivable person or team, per management approval, there could be some gentle pressure applied to clear the old invoices before the final pickup could occur. 

Customer call tips and ideas

Generally speaking, PROs should attempt to create a positive tone on accounts receivable collections calls. Remember, each of these customers contracted with your company to provide portable restroom service either in the past or at the current time. Try to maintain a positive and professional attitude and they will be future customers as well.

Never infer that the individual you are speaking with on the phone is the party that owes the funds to your company. Avoid phrases such as “you owe us blank dollars” or “you are blank days delinquent on this invoice.”

A “can you help me?” approach can be very effective in collecting funds, particularly near year end. Many times, the company or customer you are calling about old, open invoices are making the exact same phone calls to their customers. A PRO could possibly begin with “I would really appreciate your help in clearing this old invoice. You know how it is at year-end.” This puts your customer in the position of providing help rather than being subjected to pressure to a “pay or else” ultimatum.

If you experience problems reaching certain customers on the phone, consider calling them at different times of the day. We have heard of some PROs calling their list in reverse order after all the initial calls have been made. Those customers at the beginning of the alphabet are then called at the end of the day rather than first thing in the morning. 

Sending emails to customers that you cannot reach by phone requires aggressive follow up as the email addresses might be general mailboxes for the company. 

Possible areas of negotiation

Management approval may be needed for any deals offered to collect delinquent invoices. Be clear how much negotiating responsibility the employees have.

One approach, after proper approval, would be for the PRO to offer waiving some or all finance charges if the delinquent payment is received by a specific date. Depending upon the current financial and tax position of the PRO, eliminating delinquent accounts receivable in the current year could be advantageous to the company and make this a viable option to offer to the customer.

We have also heard of future offers being made by the PRO if the delinquencies are resolved. One strategy is to offer the customer free delivery and pickup on the next unit ordered if the old invoices are paid in full. The amount of this PRO’s offer was significantly less than the amount past due by the customer, but it was another method of making the process positive.

Written communication and follow-up   

Any verbal commitment of payment, a payment plan, a time commitment, or any other pertinent information given over the phone should be followed by an email confirming the conversation. This assures there is no miscommunication and the “I thought that you said” or the “I never said” conversations taking place.

“Thank you for helping me to resolve this account” in the email and any other positive remarks to the customer are generally helpful as well.

Do not mail open invoices or other communication to the delinquent customer. The “it must have gotten lost in the mail” response wastes time and effort on the part of the PRO while the amount owned by the customer continues to age.

Extra effort

Depending on the amount due and the circumstances of the situation, offer to pick up the check. This saves the customer the time and effort of mailing the funds and avoids mail delays. Some PROs have had route service technicians pick up checks from the superintendent at the job site. Carefully consider having employees pick up cash from customers as there is potential exposure for the employee to be falsely accused of receiving more money than they turned in to the office upon completion of the route. The safety of the driver carrying cash on the service truck is also a consideration. PROs need to make their own decisions about receiving cash payments made to their company. 

When all else fails …

After unsuccessfully approaching the collection of delinquent funds from a positive and customer-friendly approach, consider your legal options on filing liens on the property where the equipment was rented. Consult your state and local laws to correctly complete this process. Another final negotiation technique could be to tell the customer that a lien will be filed if payment is not received by a specific deadline.     

FINAL THOUGHTS

PROs provide quality service in return for a fair price. Until such time as delinquent invoices have been paid, that professional service has been completed for free. PROs need a year-round and consistently executed accounts receivable process that can be intensified at year-end, or at any time that delinquent invoices become an issue.

While these were merely suggestions and observations, we hope that each PRO will work to improve their collections process. 



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