Customer Collections Strategies

Many of the factors that go in to determining whether a customer will pay or not happen long before a debt is even incurred. One of the best ways to increase the rate of collection on receivables is to develop a strong relationship with the customer. It's much more difficult for a debtor to default on a vendor that they like. This involves sales people setting realistic expectations, delivering on the promise of your product and providing great customer service.

Mail Invoices Quickly

The clock starts ticking for your when product leaves your business. The clock doesn't start ticking for the customer until they receive an invoice. If you wait four days to send invoices then this is an easy way to shave days off of your receivables turnover.

The Collections Process

Many different businesses and collections agencies use a different series of communications to collect debt. The most important thing is to measure the effectiveness and find what works best for your company. The most effective approach will change depending on the industry you work in.

The elements of these customer communications take the following forms:

• Customer service calls
• Collection calls
• Collection letters

A good example of a series of collection communications is given here by American Express. This is a good starting point, but will not be the best solution for every company. For example, what works for small customers will not work as well for your biggest client. Business owners must continually work to fine tune and optimize their collections strategy in a way that minimizes customer frustration, and maximizes the receivables turnover period.