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

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Summary

The job of collecting accounts receivable is a hard and thankless one. The person who performs well in this position is the one who finds out why a customer pays late and then works with other departments to ensure that the customer has fewer reasons for doing so in the future. This approach is embodied by many of the best practices presented in this chapter, such as simplifying the pricing structure, examining customer orders to see if there are any shipment problems, and calling new customers to explain credit terms. It is also important for a good collections person to keep accounts receivable from becoming overdue in the first place. Some of the best practices in this chapter address this issue, such as granting early payment discount terms and immediately applying all cash as soon as it is received. Another part of the collections job is to perform collection calls as efficiently as possible; this task is addressed by other best practices, such as using automated faxes of overdue invoices and dunning letters, as well as a collection call database. Finally, the collections staff must use all possible pressure points to collect from customers, which it can do with the use of collection call stratification and a database of customer assets. When all of these tools are properly utilized, a collections staff not only can perform its job more efficiently, but can reduce significantly the amount of overdue accounts receivable at the same time.

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