Protect Your Accounts Receivable To Get Paid On Time And In Full
In this week’s Ask The Expert, we caught up with CRF Solutions Business Development Manager Jason Stine, an expert in accounts receivable, for his tips on what a company can do to protect its receivables and ensure payment.
What are some of the most important things a company can do to protect its receivables?
When considering whether to extend credit to a customer, gathering key information about their credit worthiness puts you in a stronger position to make a good decision and protect your remedies if payments should fail. This can be accomplished by drafting a comprehensive credit application with the standard elements of personal, business, and banking information, references and sales terms. You should also include a venue clause local to your office in the event of litigation, the ability for collection fees to be reimbursed upon monies recovered and the true credit heavy-weight, a personal guarantee (PG) which must be formatted properly to hold up in court.
Stay on top of transactions from the time products or services are delivered to the point where payment terms have been surpassed. More non-payment errors develop in the first 60 days after delivery due to insufficient or incomplete customer contact. This is where well designed internal processes and time spent are invaluable.
The saying 'time kills deals" rings true in receivables. The older a debt becomes the lower the statistical recovery will be (see the chart to the right). When the one year mark passes, recoveries drop dramatically. If customer payment cannot be resolved internally somewhere in the 90-180 day range (depending on your sales cycle and payment terms) outside efforts to escalate should be used. Start with a collection agency and when legal course is necessary involve an attorney. Good agencies will have attorney relationships nation wide and can handle all of this in one step. Holding onto files that should go to collection is one of the most common and costly receivable errors made. If uncollected, those balances fall into bad debt and must be written off, negatively effecting margins and reserve requirements.
4.) Collection Agency/Attorney
Select a service provider with the resources, experience, and skills necessary to truly assist in recovering your debt. There are many collection agencies and attorneys out there, in fact over 5,000 agencies in the US alone, but they are not created equal. Look for agencies with professional commercial collection industry certifications in the Commercial Collection Agency Association (CCAA). The CCAA has just over 100 agencies who have met their very strict certification requirements. Unique abilities like handling small balance work and offering online tools to place and access file and payment information is helpful. Agencies that communicate and innovate will stand above.
About Jason Stine
Jason Stine brings 20 years of business development, finance and start-up management experience to engage client specific needs. He's a consultative specialist that thrives on building relationships and solutions that help businesses grow to their next level.
As a Business Development Manager at CRF Solutions Jason leverages his agency's vast operational resources to educate and maximize client accounts receivable recoveries. Credit departments in smaller organizations all the way up to the Fortune 500 can benefit from first party contact and letter series support to third party collections and when needed complete litigation services. Maximizing cash flow and minimizing bad debt and credit risk is a critical element to every successful business plan, particularly for small and hyper growth companies in a strained economy. CRF Solutions specializes in working with outdoor gear and apparel companies and has numerous action-sports clients.
Growing up in Washington Jason skied and boarded the lakes and mountains, rode trail and motocross and enjoyed scuba diving. He earned his Bachelor's degree in Business from Central Washington and then moved to Los Angeles and the world of investment management. With the Internet erupting around him he followed his entrepreneurial passion into several start-up companies and today brings this wealth of knowledge and experience to his client's challenging business scenarios.