Here’s what I call the first rule of collections, make contact.

Even better, make contact early enough in the process.

Let your customer know that you’re watching it and that it’s important to you. If you’re not watching it, they can be more likely to take advantage of it. In some cases, if a customer knows that they’re not going to get a phone call until 60 days or a letter requesting payment, they might take that full 60 days to get a payment to you. Meanwhile, the sad thing is that you could have competitors or other suppliers of theirs that are making the phone calls sooner when you’re sitting on it. Guess who’s going to get paid sooner?

So what’s the counter point – you don’t want to upset the customer. A couple things can come into play here. One can be how consistent are you. If you’re consistently making first contact with the customer say at 35 or 40 days, then perhaps a follow-up at 60 days. It’s good to note that it will get their attention. The second factor can be how the letter is written. You can be firm, but understanding. They know its past due, particularly early on, and you probably don’t have to clobber them with a hammer. Give them a more firm and general reminder that it’s past due and that you need it in order to keep buying enough goods at favorable prices in order to hold their prices down.

So take care of the first rule of collection, making the first contact on the collection call. Let them know that you have your eye on the ball. Some may even really step up and use this as a platform to step up their payments.

Jon Paul, MBA, CPA, CMC, CM&AA

President, Value Added Finance Resources
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