Posts Tagged ‘invoice’

Use A Collection Attorney For Delinquent Accounts Receivable

May 11, 2010

by Doug Smith, President, The Woodhaven Group

You performed the service for your new customer as spelled out in your contract.  Your management team even did a few things at no charge to make sure this client was happy.

Now it is time for this customer to fulfill their obligation and pay the invoice in full.  Instead, no payment as agreed.  Promises to pay are not kept.  There appears to be no attempt on your customer’s part to work out a reasonable solution.

It is now 60 days beyond the final due date.  Your company deserves the cash from this customer.  You have made sure to pay all the bills in full allocated to this project.

The new question now becomes, do you send this account to a collection agency or to a collection attorney?  There is no hard and fast rule but I know which I prefer.  I will take a good collection attorney every time.

First, I assume the collection is not small which qualifies for small claims court.  Once I have determined that then here are the thoughts that guide me to using a collection attorney:

  1. Without question a letter from an attorney’s letterhead carries  more weight and stands out from the run of the mill collection agency form letters the deadbeat client is probably already receiving.  My attorney’s letter will move to the top of the heap.
  2. If the situation eventually does go to trial then I have had the same person on the account from the start.  There is no hand off from a collection agency.
  3. In my opinion, a good seasoned collection attorney should have more experience and insight into the process of collecting from an account than a  just hired account manager at a collection agency.  My experience has shown that good collection attorneys come across as professional and better able to structure a solution that works for everyone.  However, a good attorney can also go win in court if it becomes necessary.
  4. I have always felt comfortable knowing that with a collection attorney I have someone who knows the law and would not do anything to jeopardize his standing in the local legal community.  In otherwards, there are no legal or ethical shortcuts I need to worry about.
  5. By giving the attorney all of my delinquent accounts he will be committed to seeing every delinquent account through to resolution.

I have heard the one downside to using a collection attorney is that it costs more than using a collection agency.

I personally have not found that to be the case.  Instead, I believe the attorney collects more money more efficiently.  Some attorneys charge by the hour and some by the hour plus a percentage of dollars collected.  I have negotiated a straight percentage (30%) and due to the steady volume given the attorney it has worked well for both sides.  Sometimes one letter collects the full amount and other times he has to go to court. 

Some businesses prefer using a collection agency.  That is ok.

But for me a good collection attorney was like a valuable member of my management team.  Why?

Because he delivered the cash!

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Network Upfront To Increase Cash Flow From Accounts Receivable

April 23, 2010

by Doug Smith, President, The Woodhaven Group

Great news!  Your company just landed that big account everyone had been pursuing for over a year.  You took it away from a major competitor.  Sales and marketing is talking about the importance of networking and relationship marketing.  The sales manager has visions of bonuses yet to come.  The head of the company (is that you?) holds an all company meeting to announce the victory.  Someone puts the new client’s CEO on a Christmas list to receive that special cheesecake that goes to top customers only.  Well, good for you.

I’m sure everyone throughout the company will make sure the product or  service is delivered as promised and on time.

There is one important point to keep in mind.  The new relationship is not truly culminated until you are paid for all the things you are going to do for this new client.

Here is where a bit of networking and relationship building needs to occur that usually never happens.  I suggest that before the ink is dry on the new agreement that your company’s accounts receivable manager has a friendly one on one kick off conversation with the accounts payable manager of your new client.  If possible a personal meeting would  be better.  At this meeting it is important to identify all the key points for both sides that will assure that  invoices will be processed and paid as expected. 

 Topics that should be addressed:

  1. When will the invoice be sent.
  2. How will the invoice be delivered.
  3. Who the invoice should be sent to.
  4. What is on the invoice:  Example:  purchase order number, invoice number, date of invoice, quantity, individual pricing or progress payments, terms including due date, late fees, discounts for early payment.
  5. Review the monthly statement you will send and encourage them to reconcile it.
  6. How the payment will be made:  by check, ACH, wire, credit card, other.
  7. Who to call when there are questions or mistakes on the invoice or payment.
  8. What is the internal process for getting an invoice approved and paid at your client.  Is there a time lag?  Who has to approve payment? Are there any documents that need to be included? How can the process be expedited?
  9. Expectations of on time payment.

All of the above creates discipline between the two companies in the invoicing and payment process.  More importantly, a personal “real person” relationship has been developed early in the engagement before any problems occur.  This will make it much easier to remedy any glitches or situations that may come up since there is now a face with a name on the other end.

It would not hurt to periodically call the accounts payable manager and thank them for being an easy customer to do business with.  Nurture and maintain the relationship at this level as business grows  between the two companies.

There is one other benefit that will come out of this.  If your client finds themselves struggling sometime in the future, payments to their vendors may slow up.  Don’t be surprised if due to your close relationship that your company is kept current while others find payments being delayed.

All of this helps assure that cash keeps flowing into your company so more money can be invested in marketing to bring in other big clients like this one.

And about that  cheesecake for their CEO.  It might be nice to send the accounts payable manager at least a box of cookies.