Collecting Unpaid Invoices: Prioritize A/R Collections Calls (Part 1)

In a majority of companies, both large and small, collecting unpaid invoices is a constant battle. There are a number of strategies and best practices out there for managing accounts receivable more effectively, and here's. Work with a strategy that identifies your priority accounts, plan personal communications with those high priority accounts, and use tools to help you automate communications with your lower priority accounts.

The first step in this process is to identify your high-priority customers. Remember that approximately 20% of your active customer base generates 80% of the activity, so it's crucial to concentrate your limited collection resources on these customers, as personal contact will yield the greatest impact. Additionally, consider the resources you have available for making these personal contacts and the time required to manage these relationships. So, how do you determine who is a high priority?

You will need to take a look at your customers from a few different angles to determine where they should fall on the priority list; use ageing reports and customer history and past interactions to help you analyze the following:

1. Account balances. Focus on the large amounts.
2. Payment history. Slow and erratic payers vs. those who pay consistently without the need for reminders?
3. Purchase history.  Customers that purchase frequently are more dependent on your business, products, and services. You have more leverage with them.
4. History of interactions. How easy/ difficult are they to work with? If you have limited resources they should focus on the tough collection situations.
5. General collection risk.   Assess the customer’s ability to pay.
6. Specific collection risk.  Likewise, company information (e.g. length of time in business) is also a predictor of collection rise.
7. Profit margin on sales.  With low margin accounts the sooner you can collect the better due to carrying costs

A collections automation tool would be helpful by bringing all this information together in one place. It is important to keep monitoring this information at least quarterly as your customer base changes. So if you have a lot of information and plan on analyzing it often, a system such as the aforementioned would be extremely helpful.

With this list you will be well on your way to collecting unpaid invoices faster and handling the entire process more efficiently. But there is still more to learn!  Visit Nuvei - https://pages.nuvei.com/sage-100-credit-card-processing