Website design By BotEap.comI once had a boss who taught me that the best time to mow the lawn was “right before you need it.” He said, “if you look out the window and say the grass needs to be mowed, it’s too late.” The same is true in the world of accounts receivable management. The best time to place accounts for collection is “right before you need it”!

Website design By BotEap.comThink about it, most of the time when we decide it’s time to take action, it’s because we called and the phone went offline, or we sent a statement or a late notice and it couldn’t be delivered. Of course, sometimes a business closes just a few days after placing the order, but that’s really rare.

Website design By BotEap.comSome time ago I was given the opportunity to say a few words at a sales meeting, so I proposed the “Johnnie Cochran method for identifying bad accounts”. For those of you who don’t remember, Johnnie Cochran coined the phrase during the OJ Simpson trial: “If the glove doesn’t fit you, you should buy it.” Well, I suggested these two sentences: if the phone is disconnected, it will not be picked up; and, if you have to skip the trace, it’s too late to place it. As you can imagine, that got quite a few laughs. But the point is that if the account reaches that point, forget it.

Website design By BotEap.comNow I’m not saying that accounts with disconnected phone numbers are never charged. If we never collected accounts that had to be skipped, we wouldn’t be worth our salt as a collection agency. What I’m saying is that companies that use that as a method of determining when to place get a much lower collection return than companies that have a schedule that they follow most of the time.

Website design By BotEap.comMany experts in the field agree that an accounts receivable schedule must be followed to maintain positive cash flow. The exact timeline depends mostly on your terms. Assume for a moment that your terms are the normal “net-30”, the following might be a timeline you would use:

Website design By BotEap.comDay -1 You ship your product or provide service to your customer and bill them. They now have thirty days to pay, according to the agreed terms.

Website design By BotEap.comDay-30 If payment has not been received, call the customer and send a due notice.

Website design By BotEap.comDay 45 Another past warning and a collection call. They need to know that you are watching them age and that they are on the wrong side.

Website design By BotEap.comDay-60 A final call and a request for payment in writing. This request should inform you that all accounts older than 60 days are subject to outside collection activity.

Website design By BotEap.comI should pause for a second here. Some of you will say, this account is not 60 days past due, it is only 30 days past due. I have to disagree. The account is past due at the time you ship or provide the service. It’s a troublesome account until the day it’s paid, and in many cases, until the day the check clears your bank.

Website design By BotEap.comDay-75-80 A ten-day demand letter should be sent to inform your client that unless you hear from them in ten days, this account will go to collection. The key here is that when the deadline passes, you need to take action! Like I said before, by the time you make that call and get the “death tones” (the number you’re trying to call has been disconnected…) it’s too late. Write it to the experience. Someone once said, “Experience is what you get, when you don’t get what you wanted.” Making that call is like looking out your window and seeing that your lawn is a foot high!

Website design By BotEap.comRemember:

Website design By BotEap.comIf the phone is disconnected, it is not picked up.

Website design By BotEap.comIf you have to skip the trace, it’s too late to place it.

Website design By BotEap.comYou can quote me on that!