What can you do about past due receivables before you outsource?

So it happens; your customers sometimes have a due date for payment, and it is missed. The feeling of dread starts to creep in because no one wants to have uncomfortable conversations with their customers. But let's face it, it is better to get out ahead of it.

If a company has past due accounts receivable, there are several steps they can take to address the issue and improve their chances of collecting the outstanding payments. Here are some recommended actions:

1. Review the accounts receivable aging report: Generate an aging report that categorizes the outstanding receivables by their days outstanding . This will provide a clear picture of the extent and severity of the issue.

2. Contact the customers: Reach out to the customers with past due accounts to remind them of the payment that is due. This can be done through phone calls, emails, or letters. Inquire about the reason for the delay and discuss potential solutions or payment plans. Know what possible solutions are acceptable in advance.

3. Assess credit terms and policies: Evaluate the credit terms offered to customers and consider if any changes need to be made. Tightening credit policies, shortening payment terms, or implementing stricter credit checks for new customers can help mitigate future risks.

4. Negotiate payment arrangements: Work with customers to establish new payment arrangements that are mutually acceptable. This could include setting up installment plans, agreeing on partial payments, or extending payment deadlines.

5. Consider offering incentives: Provide incentives to encourage customers to settle their past due accounts. This could involve offering discounts for prompt payment or waiving late fees if the outstanding balance is paid within a specified period.

6. Escalate collection efforts: If initial reminders and negotiations do not yield results, escalate the collection efforts. This may involve involving a collections agency or taking legal action, depending on the amount owed and the company's policies.

7. Improve invoicing and communication: Review the company's invoicing processes to ensure they are clear, accurate, and prompt. Provide detailed information about the products or services rendered, payment terms, and contact information for any questions or concerns.

8. Strengthen credit management practices: Enhance the company's credit management practices to minimize future instances of past due accounts. This can include conducting credit checks on new customers, establishing credit limits, and regularly monitoring customer payment patterns.

9. Seek professional help: If the company continues to face challenges with past due accounts, seeking advice from financial professionals or credit management specialists can provide valuable insights and strategies to address the issue effectively. You may find outsourcing as a viable and possibly the best option at some point.

Remember, it's crucial to maintain clear and professional communication with customers throughout the process. Building and maintaining positive relationships can lead to improved payment behavior and customer loyalty. Be consistent, being careful to use the same language in verbal communications as you do in written. If all else fails after 60, 90, 180 days, consider numbers 6 and 9.

If you need help or want to expand on the above information, call, text, email, or comment below.

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