Balancing Accounts Receivables & Client Relationships

Get a Hold of Your Accounts Receivables. Be Proactive & Make a Plan--The life of your company depends on it.
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The Balancing Act
All companies who bill their customers play the same balancing game. The game of balancing the intention to get paid with maintaining the customer relationship takes forethought to avoid the eventual collapse in either direction. If a company bills their customer, waiting to get paid can prove itself to be more work than the job that the company originally did for that customer.

If a company has accounts receivables, than essentially they have given a line of credit to that customer on good faith. Keeping a company’s accounts receivables to a minimum is difficult but vital to the growth of the company. If a customer chooses to take advantage of the good faith extended to them, the effects of this poor choice will fall on the company who extended the credit.

Ideally, a company would collect upfront, prior to servicing; however, this is not always feasible. The next best option is to collect half down and receive half cash on delivery (COD). A Letter of Credit is often another method used which attains a guarantee from the customer’s bank that verifies the available funds.

Nonetheless, most often companies choose to bill their customers after service or product has been issued. In this case, creating a plan to handle past due accounts is important to the reputation and life of the company.


So, why do customers pay late?
There are countless excuses from not having the money at the moment to losing the invoice. The excuse is irrelevant. The customer entered into a promise that they need to keep. Unfortunately, paying your bill is not your customer’s priority. Their focus is on their business, not yours, and often there are levels of priority in the accounting department as to which bills are paid first. Unfortunately, the small ‘Mom & Pop’ shops are often paid last. With that said, there are effective methods for managing those past due accounts, although at first it may seem unpleasant, once you embrace the value of integrity in all business aspects, then you will understand that the with the same integrity your company provided service and/or product you should expect equal integrity in return from that customer—“Do what you mean, mean what you say”. In order to stand by this, you must be firm and follow through. Consistency matters.


“Fool me once, shame on you…fool me twice, shame on me”
Aging reports need to be checked every day; whether you have someone else doing the actual collecting or not, you still need to know the status of your accounts. Be aware of what is happening. Most people neglect and put off things that are displeasing to them, and being the ‘collector’ is a hat most people do not wish to wear. However, the problem does not go away if you ignore it—actually, it only gets worse. Unlike wine, your accounts receivables do not improve with age. Unless, you take steps to remedy the problem, it will deteriorate to a point that it may no longer be collectible. Remember, you may not be the only one not getting paid by that customer. If a customer is having difficulty paying you, then the health of their business should be a concern and bankruptcy maybe in their near future.


Be Proactive
Take proactive steps to manage your account receivables. Begin by setting up a procedure for the quick collection on past due accounts. Then, set a plan in place for past due accounts 30, 60, 90 days and so on. The day your customer’s bill is due, they need to be contacted. Get a hold of them, and document all correspondence with this customer.

Create a complete file on this customer, not only for this account, but should your company choose to do business with this customer again, there is a history of this customer’s integrity, or lack thereof, concerning their accounts. Collect contact names, numbers, email addresses, and any necessary information. This will also greatly assist you or a collections agency, should the customer not settle their account peaceably and swiftly.


Learn the Art of Good Cop, Bad Cop
Cultivating good receivable collecting practices will improve your cash flow. Educate your staff on the importance of managing and collecting account receivables, and the procedures concerning the past due accounts. A good way to improve cash flow is to make the entire company aware of the importance of accounts receivable and collections. Should an account become deficient past 60 days, it’s time to step in with “Good Cop, Bad Cop”. Your company has played the part of ‘good cop’ without much avail, now it is time to place that account with the ‘bad cop’; one who will get in there aggressively and work to settle that account and get you your money. Stillwell and Stone, LLC is one of those firms that often sees results within the first 72hours! This is the type of company you should place your accounts with; one that doesn’t get paid until you do. This is a cost effective way to retrieve your money. There is no need to waste your time and money with a traditional lawyer who will continue to be the ‘good cop’ and write those “love letters” requesting for payment. As you know, that doesn’t work. The ‘bad cop’ needs to be fast and aggressive.

The art of ‘good cop, bad cop’ is very effective and will help eliminate the potential snowball effect that could happen to your accounts receivables should they be ignored and left to time.