Collecting Accounts Receivable

Late paying customers can throw a business into a cash crunch.

In this eNews, we learn from the experience of Rick Roberge, who specializes in collecting Accounts Receivable for businesses.  This continues our 'from the trenches' series in which we showcase the expertise of professionals with whom we work collaboratively.

Rick has been a 'bill collector' for almost twenty years.  He sees the pattern over and over again.  Business owners are so busy selling and working to make their business a success that they don't take the time to follow up on slow-paying customers.

Running out of cash is the most common reason that businesses fail.  It's possible to be profitable but cash poor because of late paying customers.

Collecting Accounts Receivable quickly is a fast way to bring cash into the business.  And, every day Accounts Receivable are not collected, the more likely the company will be strapped for cash.

Rick's advice is 'Collect the easy ones first!  Gently nudge the 30-45-60-day accounts first.  Gently!  New accounts require much less work to produce big results.'

Set up a system.

Rick advises business owners to set up a system and follow up promptly on all late payments.  At least monthly, review all unpaid accounts and call or send a follow-up notice.

  • Follow up gently.

    In Rick's experience, sometimes there are valid reasons why customers haven't paid.

    When you follow up with clients and ask them, 'Is there a problem with the bill?' you may learn about customer service issues, missed opportunities and additional sales.  So, be prepared for negative feedback and listen carefully to what your customers have to say.

  • Be polite, persistent and pleasant.

    Making a call to the customer is a 'marketing opportunity' as well as the opportunity to bring cash to the company.
Call a professional bill collector.

It's time to call a professional bill collector when you can't get any response from a customer, or the customer repeatedly fails to follow through on promised payments.
  • Don't wait longer than 60 or 90 days, because the longer the account goes unpaid, the lower the probability of collecting.
  • Bill collectors generally charge on a contingency fee basis.  The fee is usually one-third of the amount actually collected.
In conclusion, it's good business practice to monitor payments and follow up promptly when payment is not received on time.  Finding out that a customer for whom you've just done a large project has gone into bankruptcy is bad news.

We thank Rick Roberge, Collections Manager at the law firm of Gulley & Associates in Walpole, MA for his insights.  Rick can be reached at 508-660-6900 or rroberge@gulleylaw.com.

Jean D. Sifleet
Attorney & CPA

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Information provided on this website is intended for a general overview and
should not be construed as legal advice for a particular situation.