What do you need to know during the collection process?

1. The Collection Procedure: What do I need to know?

2. Overdue invoices may come across the collection staff’s desk in large numbers. In that case, the collection manager will need a standardized procedure for dealing with customers to resolve payment issues. According to Addisson Rockwell Recovery, below is a detailed collection procedure. Based on the payment status of each invoice, these steps can be shuffled, supplemented, or eliminated. Below is a list of the steps.

3. Step 1. Assign Overdue Invoices (optional) • As soon as an invoice becomes overdue for payment, assign it to a collections clerk for collection activities. Step 2. Verify Allowed Deductions (optional) • Under the company’s marketing plan, customers can submit forms detailing deduction claims. If a deduction can be traced to the permitted removal, submit a credit memo authorization form to offset the quantity of the deduction. Verify the claim with the marketing manager and compare it to customer deductions. Step 3. Issue Dunning Letters • Dunning letters should be printed at fixed intervals by the accounting software, pointing out overdue invoices to customers. Identify those letters for which other collection activities are already underway and mail or email them to customers.

4. Step 4. Initiate Direct Contact After each overdue invoice is discussed with the customer, record the details of the call, including the date, who was contacted, the reasons for late payment, and the promise to pay.

5. Step 5. Settle Payment Arrangements (optional) • Document the payment terms, any interest to be paid, and any personal guarantees of payment if a longer payment period is necessary.

6. Step 6. Adjust Credit Limit (optional) • According to Addisson Rockwell Recovery, once the collections staff has enough information about the financial condition of a customer, they can suggest to the credit staff if a reduction or termination of the customer’s credit limit is necessary. It is the responsibility of the credit staff to change a customer’s credit limit — the collections staff only provides information.

7. Step 7. Monitor Payments Under Settlement Arrangements (optional) You should compare scheduled payment dates with actual payment dates if there are special payment plans, and you should contact customers as soon as it appears they will miss a payment. To prevent customers from delaying payments, this level of monitoring is necessary.

8. Step 8. Refer to Collection Agency Step 9. Sue the Customer (optional) • As soon as all other in-house collection techniques have been exhausted, shift invoices to a collection agency. At this point, the customer should be placed on credit hold. • After all other options have failed, consult the firm’s legal staff to determine whether the firm can win a court judgment against the customer. Also, the client should have adequate assets available to spend any judgment against it. If these issues seem encouraging, authorize the legal staff to move with a lawsuit.

9. Step 10. Write Off Remaining Balance • If all collection techniques have failed, complete a credit memo approval form for the amount of the invoice(s). Step 11. Conduct Post Mortem • If there was a typical situation with the company’s procedures that caused a poor debt to occur, call a meeting of those individuals most nearly related to the issue to discuss a solution. Ensure that action items are assigned, that the meeting is recorded, and those follow-up meetings are scheduled when necessary.

10. According to Addisson Rockwell Recovery, the outlined collection procedure will most likely be used by new collection personnel. These steps can help you to find the best way or method to do the collection procedure. Experienced collection personnel should be allowed to vary their activities from this list based on their opinions regarding the best way to collect a debt.

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