Small Business Shared Interest Group

  • 1.  AR Collection Issues

    Posted 11-14-2024 06:46 PM

    Hi all,

    What are some ways you are collecting past due accounts prior to sending to a collection agency? Offering a payment plan can sometimes be effective, but there are times when customers claim they are waiting for a loan or other funding to come through before they can pay, and the date keeps getting pushed back. We have never used a collection agency; however, I would like to learn more about them along with other options that might be effective in collecting past due AR. Thanks for your ideas and experiences!



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    Jennifer Pinder, MBA
    Controller
    Watchdog USA, LLC
    Philadelphia, PA
    United States
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  • 2.  RE: AR Collection Issues

    Posted 11-21-2024 06:00 PM

    Hello Jennifer Pinder,

    At my company, we encourage customers to charge their purchases to a credit card. It removes the hassle of trying to collect. I've found through using this policy that most customers are receptive to the idea. However, we do allow local government offices and certain longtime customers to charge to an A/R account. We don't use collection agencies. Sending A/R accounts to collection agencies or writing off the account to bad debts doesn't improve customer satisfaction, which is needed for a small business. Therefore, we work hard to have the fewest possible A/R accounts. 

    Hope you find this helpful, 



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    Samuel Smith, MBA,CMA
    Controller/Office Manager/HR Manager
    Kirksville, MO
    United States
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    Original Message


  • 3.  RE: AR Collection Issues

    Posted 11-22-2024 09:11 AM

    I'd argue that AR Collections starts when you are considering adding a company as a customer. 

    Requiring a credit application and insisting that all necessary fields be completed.  Name and contact information for AP as well as Accounting Manager and Owner. 

    When possible, get a Personal Guarantee. 

    Does your system support ACH Direct Debit?  Your customer would need to sign-up for this but this will allow you to debit their bank account directly when your bill is due.

    Check their credit references.  Yes, most will probably be glowing, but no reply may also say something. 

    Run a credit report.  This may give you additional information and may help validate your decision on limit and terms.

    Credit Insurance may be an option to consider.

    Some industries or transactions may require milestone payments.  Certain percentage with order, another before shipment and the balance due after delivery.  I have some customers that we require payment before shipment because their history doesn't support open terms and/or limit for what they are ordering.

    After the sale your AR team needs to send statements to all customers as part of the month-end closing process.  Additional statements can also be sent to customers with past due accounts.  Once an account hits a point where it is past due you should start emailing directly.  Next step for me is then calling.

    If you can, put the account on shipping hold or credit stop.



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    Paul Napper CMA, CFM
    United States
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    Original Message


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