Accounting Best Practices, Fifth Edition

7–34. Call New Customers and Explain Credit Terms

When a new customer receives its first invoice from a company, the standard sequence of events for the accounts payable staff is to enter the “pay to” information in the computer system, accept the corporate default payment days (such as 30), and press the ENTER key. By doing so, the customer has completely ignored the company’s payment terms, not to mention any early payment discounts that may have been added (and possibly negotiated at some length with the customer). This is a particular problem early in a company’s relationship with a new customer, since the credit department is keeping an especially watchful eye on the payment situation. If payments arrive late, the business partners are off to a bad start.

The solution is to contact the customer at the beginning of the relationship and explain the payment terms. By taking the time to make this contact, the customer is now aware that the company takes payment terms seriously, and expects them to be observed. This contact can take the form of a phone call, personal meeting, or letter. A phone call or personal meeting is the best alternative, since it gives the customer a chance to bring up any special payment issues that could interfere with timely invoice payment.

The key point is to make sure this contact is made with the correct person, or else the time invested in this best ...