Question: Our company engages in “Account Receivable Dashes” several times throughout the year. These are periods where we enlist additional personnel to help to make collections calls on past-due accounts. We want to get away from these practices and to have a more year-round approach to collections. What are some of your suggestions for accomplishing this goal for our company? What are some successful tips to increase our collection rate? 

Answer: Using your terms of “Accounts Receivable Dashes,” we like to consider accounts receivable and collections as a year-long marathon. In a marathon, the runner sets a steady, consistent pace that is kept over the long length of the race. A successful accounts receivable program is no different. Once you establish a program of routine and consistent practices; you follow these steps throughout the year.   

Internal components of a successful A/R collections program

Organize your personnel such that each person has specific, routine responsibilities in terms of customer collections. 

• Have an accounts receivable key contact that is responsible for, and whose performance is measured by, the results of customer collections. There is an old expression in business that “if you cannot measure it, you cannot improve it,” and this is true in terms of customer collections. Generate an accounts receivable aging report on the first day of each month as a baseline to measure results and to establish collections goals in the coming month.
• Run accounts receivable reports on Monday and use these throughout the week to contact customers 
• Notate, notate, notate. Recording notes from conversations with customers provides a history where effective follow-up can take place. This is even more important if there is more than one employee with A/R responsibility or if another employee is filling in for another. Your company needs to have all the necessary facts recorded so that there is no communication breakdown between your customer and your company, especially if the matter has to be escalated to a collection agency or a legal firm.

External components of a successful A/R collections program

Communicate your company’s accounts receivable terms and conditions with your customer.     

Many PROs will include all the company’s terms and conditions as part of every invoice that is sent to a customer. In addition to their responsibility for the possession and maintenance of the rented property, insurance claims and other legal disclaimers, collections terms and conditions are included. These collection terms can also be repeated in a prominent location on the front of every invoice. 

Collection terms to be decided upon include:  

• Will a credit application be required to be completed by the customer? Will this apply to construction customers, event customers or all customers?
• Must a valid credit card be on file with your company? Will this pertain to repeat customers or new customers? Construction customers? Event customers? 
• Will late fees be applied? Will this be after 30 days? 60 days? 90 days? Other?
• For construction customers — will normal service be halted if payments are delinquent? If so, at what point?
• For events customers — will a prepayment be due prior to delivery? If so, what percentage? These terms and conditions need to be included in the initial proposal or bid for the event.
• Final collections actions — if payment is not made after a certain time, is the account turned over to a collection agency? Turned over to a law firm?

Successful collections tips

Here are our suggestions for maintaining a successful collections program:   

Always maintain a positive and professional attitude when working with customers on collections calls. We feel that this is one of the most important tips that we can share. Treat the customer as an ally, not an opponent. 

— Avoid phrases such as “You owe us this many dollars,” “You are blank days delinquent on this invoice,” or “I am going to turn you over to a collections agency.” These phrases create confrontation and the person on the other end of the line feels like they are being threatened.    

— Make your company procedures reflect one of teamwork with the customer. Phrases such as “Can you help me?” and “I would really appreciate your help in clearing this old invoice” encourages the customer to work with you, not against you.

• Establish company procedures and guidelines for certain employees to be able to negotiate with customers in some situations concerning past-due accounts. Perhaps if the balance is above a certain amount, your policies may be that you can offer to waive some of the late charges to secure payment if your management staff approves.  
• Use route service drivers to deliver past-due collection information packets to superintendents on the job site. Calls from the workers on site to their staff in the office can often get invoices paid to your company. 
• If no personnel are on the job site and your company has determined that service needs to be halted until delinquent invoices are paid, some PROs will have the route service driver “flag” or “tag” the unit with a note that reflects that service has been halted due to payment problems.
• Offer to pick up delinquent payment checks directly from the customer, as a convenience to them and to ensure continued service and not rely on mail delays to halt service.
• Proactively monitor and maintain customer credit card information that is on file with your company. The company A/R contact should review this information monthly to ensure that all credit card information is current. If a credit card that is on file is due to expire in 30 days, a courtesy call should be made to the customer as either a reminder or as a time to obtain the renewal information.
• Resolve payments and payment terms prior to delivery of special event units. At the time of final planning for delivery and setup of the equipment with the customer — usually the week before the event — company policy should dictate that agreed-upon payment terms need to be completed at that time. 

Accounts receivable is the engine that propels your business. Treat collections as you would your routes. Have daily and weekly standard practices and procedures to monitor and to collect invoice payments. Notate conversations and keep accurate records just as you do with your routes and your collections efforts will be successful.