Avoid the collection process and allow your customers to buy from you

According to the Bureau of Labor Statistics, debt collection industry is growing faster than most companies in the United States. Although the economic situation has increased, the increase in demand for collection services is also due to the general lack of good accounts receivable management practices

This is not a criticism of the US business. US companies are leading the way in product management, marketing, distribution and project management. US companies are also aware of the need to outsource other business areas beyond their core competencies.

A basic overview of historical AR data shows that the debtor belongs to one of the four categories

Reliable – the customer will pay from the first statement. They can even pay in the absence of a statement, but I do not recommend doing so.

2. Distracted – this customer will pay, but they are busy. They forget, and sometimes they need to remind.

3. Do not respect – this customer will pay until there is a consequence. That's why most customers pay in the collection to respond to the first collection letter.

4. Professional debtors – these customers have never intended to pay. They need professional intervention to legally require payment.

Only about 10% of people and companies belong to the third or fourth category. This means that up to 90% of the debt can be recovered without legal action or bad debts. Every company should explore cheap and customer-sensitive ways to encourage the first two types of debtors to deliver their payments to others. After all, the first two categories are customers who can re-purchase when their current situation improves, and if they are respected in the temporary cash flow challenge,

The high cost of collection agents is unavoidable. Moving the customer to the collection should always restore the last effort that could not be recovered by other means. Identify the key to truly recoverable debt and may save customers who are able to pay in full and perform an effective AR management process. This behavior can also promote good customer relationships.

Effective AR management is not just sending reports and transferring customers to a collection of non-payments. The two integrated processes that must be considered include 1) basic invoices or points of sale, conditions and 2) expert AR follow-up invoices. The latter process is a key task, known as a pre-payment or a soft receipt, which can be obtained from a company that specializes in these services.

General basic invoice conditions:

1. Uniform through sales and invoice terms and conditions

2. Immediately before shipment, delivery, etc.

3. Pay early small discounts, such as invoice within 10 days

4. Monthly registration of automatic credit card or electronic check payment account bonus or discount

Unique, custom prepayment operation:

1. A consistent but friendly reminder is about to expire, as a courtesy rather than a warning.

2. Quick, but moderately responded to missed payments, again as courtesy.

3. Well-designed, consistent pre-collect letters series help, not a threat.


Each of the pre-payment actions listed in the above-mentioned after-sales process is positive for the customer and the customer is likely to try to fulfill the obligation not to avoid them. If these actions are carefully designed, timely and consistent, the customer can avoid the debt collection notice of the external collection institution.

Most of the time, according to statistics, slow payment of the debtor in the pre-payment process, never become bad debt statistics. This not only saves money for the supplier company, but also helps the customer appreciate the value of the ongoing relationship with the supplier partner who sees the benefits that help the customer boom.