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Accounting Best Practices, Fifth Edition by Steven M. Bragg Englewood, Colorado

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Chapter 7. Credit and Collections Best Practices[1]

[1] Selected best practices in this chapter are adapted with permission from Steven M. Bragg, Billing and Collections Best Practices (Wiley, 2005).

One of the worst jobs in any company is collecting on overdue accounts receivable. The person who must do the collecting never knows if an invoice has gone unpaid due to the company’s fault or the customer’s. There may be a very valid problem caused by the company that is making the customer wait on payment of the invoice, such as a damaged product shipment, a billing for the incorrect amount, or pricing that does not match the customer’s purchase order amount. In these cases, the collections person apologizes to the customer for the company’s sins and then tries to correct the internal problems responsible for the collection trouble. In other cases, the collections problem may be caused by the customer, who either cannot pay or who is deliberately stretching the payment period past the agreed-upon date. In such situations, the collections person must diplomatically bring pressure to bear on the customer, which is a difficult skill. No matter what the reason for an invoice being overdue, the collections person must ascertain the correct reason for the problem and fix it.

This chapter provides many best practices that allow a credit and collections staff to reduce the error rate of invoices being sent to customers, while also providing new tools to force customers to pay by the due ...

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