Effective Credit Management – Part 3

The following credit procedures timeline can be modified to suit your specific requirements.

Day

Step

Action

 

1.

Every new account should be accompanied by a signed credit application

A company search should be conducted to verify the legal entity

Every order should contain a purchase order

 

2.

At the time an order is received, an invoice is raised

 

3.

An invoice accompanies delivery to the client

 

4.

A monthly account statement is sent to the client

Day 0

5.

An aged debtors report is produced and reviewed and discussed by management and the accounts receivable officer

 

6.

All accounts outside payment terms are highlighted and discussed

 

7.

All accounts over limit are highlighted and discussed

Day 5

8.

All accounts overdue and over-limit accounts are contacted by telephone with a ‘friendly reminder’ that their account is outside terms (refer telephone script)

Day 7

9.

Following the reminder calls, a note clarifying the position of each overdue or over-limit account is recorded in the AR system

Promises to pay are also recorded in the system

Day 14

10.

Where the verbal reminder does not result in payment within 7 days of the reminder call, a gentle Reminder Letter is generated from the AR system (refer Reminder Letter sample text)

Day 21

11.

Where the previous reminders have not resulted in payment of the account, a further follow up call is made to the customer to clarify their reason for non-payment and to seek a commitment to pay

Reference should be made to the previous call (and promise to pay, if appropriate) as well as the reminder letter, and a further commitment to pay should be sought

The Accounts Receivable Officer should also refer to ‘company policy’ and advise the customer that unless the account is paid within the terms just agreed, then it will be referred to their nominated collection agency

Day 28

12.

Where all internal collection efforts to date have not resulted in payment, the Final Demand Letter is sent to the client (refer Final Demand sample text)

The Final Demand will advise the customer that unless the debt is paid within 7 days the matter will be referred, without further notice to the nominated collection agency

Day 35

13.

Where all collection efforts have been unsuccessful, the matter may now be passed to the nominated collection agency for recovery

 

  

1. Example – Friendly Reminder Letter or Email

[Name]

[Company]

[Address 1]

[Address 2]

[Suburb] [State] [Postcode]

 

Dear [First Name],

RE: OVERDUE ACCOUNT – $[Amount]

We write to advise that your account is overdue. In order to assist you, we have attached a copy of the outstanding invoice(s).

We would appreciate your prompt settlement of this account. Please remit the above amount to us within seven (7) days.

If you are experiencing difficulties paying this account, please do not hesitate to contact our office so we can discuss alternative arrangements.

Yours sincerely

[Name]

Accounts Receivable Officer
Phone:
Email:

2. Example – Final Demand Letter or Email

[Name]

[Company]

[Address 1]

[Address 2]

[Suburb] [State] [Postcode]

 

Dear [First Name],

RE: OVERDUE ACCOUNT – $[Amount]

Further to our letter dated [Insert Date] we write to you again in relation to the above account. We note that the above amount remains outstanding and is now [Insert Number of Days] overdue.

[Insert Your Company Name] maintains a policy of always trying to assist customers who are having difficulty meeting payments, but to do this we need your help. It is important that you contact us urgently so we can discuss and agree a payment solution suitable to both of us.

Where full payment or alternative arrangements are not made within seven (7) days of the date of this letter, we confirm that we will be instructing AMPAC Debt Recovery to act on our behalf in order to recovery this debt.

Yours sincerely

[Name]

Accounts Receivable Officer
Phone:
Email:

Mark Logue is a debt collection specialist and the joint managing director of AMPAC Debt Recovery. He has more than 30 years experience in the debt recovery and credit reporting sector, covering all segments of industry and commerce throughout Australia and overseas. Mark can be contacted by phone on 0409 749 709 or by email at m.logue@4ampac.com.au

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