How to Improve Collection Management
A sale is not a sale unless payment is collected. Having an effective collection management strategy in place has an immediate positive impact on your company’s bottom line. In severe cases, it may even save your company from bankruptcy.
Here are some tips to improve your collection percentage:
• Develop a good credit screening policy. Prevention is always better than the cure. If you are already saddled with collection problems, improve your credit practices by learning from the bad debts or hard to collect accounts you experienced in the past.
• Act promptly if there is a delay. Being the first to react has many advantages. It will result in faster payments in case you are able to collect. Remember that you are probably only one of the many creditors of the company, and if the customer’s funds are limited then being first to demand payment may help your chances.
• Evaluate the reason(s) for non-payment. There are many possible reasons for delay in payment, and the approach must be tailored accordingly. Your most important task is to determine the integrity of the debtor. There are even cases where it is justified to immediately seek legal action.
• Send reminder letters. This should be the first action if there are no other danger signs. The delay may be due to forgetfulness. Even if there may be other reasons, it is only good manners to assume the best, unless you have evidence to the contrary.
• Be firm but respectful. While you must stand up for your company’s interests, you must not forget that Filipino culture requires you to find face-saving measures. You must be creative so that you never even imply that the debtor is doing something wrong while requesting payment.
• Be innovative in locating the debtor. Besides the traditional ways of skip tracing, like interviewing people that may possibly know his current address, you may also resort to checking out the internet especially the social media sites like Facebook for clues to the debtor’s whereabouts.
• Use the small claims court when possible. There is a new law that facilitates collection of debts that are not over one hundred thousand pesos – it establishes a small claims court. One of the cost-saving features is that lawyers are not allowed unless they are one of the parties. Procedures here are simplified in order to hasten the resolution of the case.
• Do not be afraid to sue if there is no other recourse. There are cases where your only option is to go to court. There are debtors who will only pay if they are forced to.
• Get what you can if it seems the best option. If the debtor is really not liquid, then try to get what you can – be it cash or whatever asset you can get.
• Be persistent. As long as there is a chance, never give up. Success in collection boils down to persistence!
Poor collection strategies result in lost revenues. Having a systematic strategy on how to go about this process properly will pay off for the company.
Want to learn more on how to set up an effective collection procedure? BusinessCoach, Inc., a leading business seminar provider, conducts seminars on Credit and Collection. You may contact them at 727-5628 or 727-8860, or visit their website www.businesscoachphil.com for details.
Click here to view details of the seminar: Credit and Collection Seminar »
*Originally published by the Manila Bulletin. Written by Ruben Anlacan, Jr. (President, BusinessCoach, Inc.) All rights reserved. May not be reproduced or copied without express written permission of the copyright holders.