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Top 10 Ways To Improve Payments

Thursday, May 10th, 2012 | The Cash Flow Group | No Comments

Top Ten Ways to Improve Payments


When a company provides a product or service, it has the right to be paid on time. However, anyone who is in business quickly learns that prompt payment doesn’t always occur. Accounts can sometimes become seriously past due or customer checks can bounce when payments are made. Unfortunately, cash flow can be severely impacted by these slow paying customers.

To reduce the number of slow paying accounts, evaluate your current practices and see if they align with the following ten guidelines:


1. Have A Clearly Defined Credit Collection Policy

One major cause of overdue receivables is the lack of a written payment policy that tells your staff and customers when accounts must be paid. Make sure that your company’s terms of payment are clearly stated in writing, to each customer, since uneducated customers often pay late or sometimes not at all.


2. Invoice Promptly and Send Statements Regularly.

If you don’t have a systematic invoicing and billing system, get one. Many times the customer hasn’t paid simply because they haven’t been billed or reminded to pay in a timely manner. This situation regularly occurs in small businesses where there isn’t enough staff.


3. Use “Address Service Requested”

One of the most difficult collection problems is tracking down a customer who has “skipped.” All businesses should be aware of a special service offered by the Post Office. Any statement or correspondence sent out from a business or professional office should have the words “Address Service Requested” printed or stamped on the envelope, just below your return address in the top left corner. If a statement or invoice is sent to a customer who has moved without informing you of his new address and the words “Address Service Requested” appear on the envelope, the Post Office will research this information. If they can locate a change of address on that person, they will send you form #3547 with the correct address (50 cent fee).
This also keeps your address file up to date.


4. Contact Overdue Accounts More Frequently

No law says you can contact a customer only once a month. The old adage “The squeaky wheel gets the grease” has a great deal of merit when it comes to collecting past due accounts. It’s an excellent idea to contact late payers every 10-14 days. Doing so will enable you to diplomatically remind the customer of your terms of payment.


5. Use Your Aging Sheet, Not Your Feelings

Many businesses (or well-meaning people on their staff) have let an account age beyond the point of ever being collected because he or she “felt” the customer would pay eventually. While there certainly are a few isolated cases of unusual situations, the truth is that if you aren’t being paid, someone else is. So stick to your systematic plan of follow up. You’ll soon know who intends to really pay and who doesn’t. You can then take appropriate action once you know where you stand.


6. Make Sure Your Staff is Trained

Even “experienced” staff members can sometimes become jaded when dealing with past due customers. This usually occurs when they have made and broken promises for payment. Make sure the staff is firm, yet courteous when dealing with them. Your collection staff could benefit from customer service training because, in effect, they must “sell” your customers on the idea that you expect to be paid. Make sure that your collection staff is trained to not only bring the account current, but to also maintain good will with them.


7. Admit and Correct Any Mistakes on Your Part

Sometimes customers don’t pay because they feel you’ve made a mistake. If you have, quickly admit it and correct it. Your customer realizes that mistakes can happen in business. Unfortunately, many customers believe that “the owner/president doesn’t need the money.” Denying obvious errors only fuels the fire of resentment your customer may
already feel.


8. Follow the Collection Laws in Your State

In many states, businesses are governed by the same collection laws as collection agencies. For example, calling customers at an odd hour or disclosing to a third party that they owe you money are just a couple of the numerous collection practices that can get you sued. Imagine a person that OWES you money filing a lawsuit against you. If you’re not sure that you are compliant with the law, call your state’s department of finance.


9. Use a Third Party Sooner

If you’ve systematically pursued your past due accounts for 60 to 90 days from the due date, (and they still haven’t paid) you’re being delivered a message by your client. More than likely, you’ve requested payment four to six times in the form of phone calls, letters and statements. Statistics show that after 90 days, the effect of in-house collection efforts are reduced by 80%. That means that the time and financial resources budgeted for collection efforts should be focused within the first 90 days where the bulk of your accounts can and should be collected. From that point on, a third party can motivate a customer to pay in ways you cannot, simply because the demand for payment is coming from
someone other than you.


10. Remember That Nobody Collects Every Account

Even by setting up and adhering to a specific collection plan, there are a few accounts that will never be collected on. By identifying these accounts early you will save yourself and your company a great deal of time and money. Even though a few may slip by, you’ll find that overall the number of slow paying and nonpaying accounts will greatly
diminish, and that’s a victory in itself!

(July 2002 Article from

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