CHAPTER 8
Managing Your Accounts Receivable
Many books have been written on debt management and collection practices. This chapter assumes that your accounts receivable staff have read some of them or attended a workshop on the subject.
Operational Improvements to Accounts Receivable
Some better practices you may wish to adopt are:
- Have the right mental attitude about credit control (e.g., do not feel guilty asking for money—it is yours and you are entitled to it; and 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 professional 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 promptness and accuracy.
- Charge penalties on overdue accounts.
- Consider accepting credit cards for smaller high-risk customers.
People will take as much credit as you give—and that doesn’t mean what your credit policy allows, it means what you let them take.
A lot of bad practice has grown around the giving and taking of credit. Conventional wisdom says that the less credit you give and the more you take, the better off you are. However, this ignores the real overhead cost created by tracking and reconciling ...
