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Are you offering clients 0% payment terms without even realizing it? Our three-part series can help stop the insanity.

Budgets | July 11, 2017


Analyze your collections process: To prosper, be proactive!


Most middle market size companies allow their customers to treat them like a bank that is offering 0% interest rate terms. Analyzing your credit approval process (described here) is the first step to fixing your payment terms. Now, you’ll need to analyze your collections process in your accounts receivable functions.

Is your collections process proactive?  We often find that companies that are ONLY reactive when it comes to collections efforts.  They begin calling, emailing, and writing letters only when the customer is late on a payment.  This creates tension and, in our view, is rarely as successful as the alternative.

Begin every new client relationship with a phone call from your accounting team (or AR person) directly to their accounting team (or AP person).  The purpose of the call is to introduce yourself, establish a connection, and obtain any information you can about this person—personal details or hobbies learned is great information.  You will also be asking them to verify that they have everything needed in order to pay your invoice timely and remind them of the terms of your invoice.  The tone of this phone call is positive, friendly, and informative.  Then, if the customer is 1 day late, you can call again and politely inquire about problems they may have encountered having already established the relationship on friendlier terms.

Once your client knows that you are serious about being paid on time, they will usually make a greater effort to ensure they pay you on time, and often in advance of your due date.  With this relationship as a foundation, you will know quickly if something changes in the relationship.  As an example, if your client’s CEO has told the bookkeeper not to pay your invoice, you will know this sooner because of your relationship with their accounting team than you would have if you waited until the invoice was 45 days late to start sending collection letters.  It is our experience that this approach saves up to 30 days on some accounts.

Establishing a good relationship with your clients and setting a set payment schedule can make a substantial difference in fixing your payment plan. Continue to follow our approach, and your accounting team and accounts receivable function should pay for itself in value. If your organization is not doing this, Ask CFOSP How.

Shannon Carbone, CEO of CFO Strategic Partners

Shannon Carbone is the Founder and CEO of CFO Strategic Partners, a financial consulting firm headquartered in Central Florida offering CFO on demand, outsourced CFO, virtual CFO, and comprehensive accounting services for clients with either short-term or long-term needs since 1999.


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