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The Financial Controller and CFO's Toolkit, 3rd Edition by David Parmenter

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Chapter 13Managing Your Accounts Receivable

Many courses are offered on the subject of debt management and collection practices. This chapter assumes that your accounts receivable staff are well trained, and thus, I will only cover a selection of the intelligent practices I have come across while benchmarking organizations' practices.

OPERATIONAL IMPROVEMENTS TO ACCOUNTS RECEIVABLE

Some better practices you may wish to adopt are:

  • Have the right mental attitude about credit control (e.g., when asking for your money, be hard on the issue but soft on the person).
  • Provide immediate notice of overdue debt to the sales team.
  • Establish clear credit practices and communicate these credit practices to staff and customers.
  • Be thorough when accepting new accounts, especially larger ones (e.g., perform the credit checks that a bank would when lending the same amount).
  • Continuously review credit limits, especially for major customers, if tough times are coming or if operating in a volatile sector.
  • Monitor sales invoicing with promptness and accuracy.
  • Charge penalties on overdue accounts.
  • Accept credit cards for smaller high-risk customers.

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