Accounts Receivable Unit 2

Billing Processes

• Invoice: A bill containing information for customers to pay for goods or services.
• Invoice Timing: Send invoices as soon as possible after shipment to ensure customers start the payment clock upon receipt.
• Payment Terms: Clarity on payment deadlines is crucial, as most customers interpret "net 30" as 30 days from invoice receipt.
• Invoice Contents: Include addressing, delivery details, product/service description, quantities, delivery location and date, amount, reference/purchase order number, order date, ordering person/department, payment conditions, payment method, and credit manager contact information.

Invoice Tips

• Avoid odd-colored or odd-sized paper for easier readability and imaging.
• Ensure clear and legible printing, ideally with a modern printer.
• Include contact information for customer inquiries.
• Bold the due date for emphasis and clarity.
• Review large dollar invoices for accuracy before sending to maximize discount opportunities.

Electronic Billing

• Process: Invoice delivery via the internet in electronic format, eliminating paper handling and enabling efficient data retrieval and storage in a network.
• Benefits: Reduces rekeying errors, improves workflow, minimizes costs, and removes the "mail" excuse for delayed processing.

Collection Processes

• Many accounts receivables professionals believe that the collection process starts with the credit application.
• General Tips: Be friendly with accounts payable managers, educate customers on payment terms, focus on large accounts, follow up frequently and persistently, create detailed sales agreements, keep detailed notes of promises and track their fulfillment.
• Invoice Accuracy: Ensure accurate invoice data, notify both customer and salesperson about credit holds, maintain open communication, and follow up on promised actions.
• Customer Support: Assist customers with problem resolution, train new customers on payment policies, treat everyone with respect, and emphasize prompt payment for new accounts.

E-mail for Enhanced Collection

• Strategic Utilization: Use e-mail judiciously to avoid junk mail categorization.
• Sales Force Incentives: Withhold salesperson commissions until payment is received to motivate collection assistance.

Collection Agencies

• Selection Criteria: Focus on the agency's return on investment (ROI) rather than solely on fees.
• Reference Checks: Verify agency performance through reference checks, including inquiries about their experience with the agency, their willingness to use them again, and their overall rating.
• Agency History: Consider the agency's duration in business.
• Timing: Submit accounts to the agency while there's potential for recovery.
• Late Accounts: Avoid turning accounts over too late (e.g., after 6 months), as this can hinder collection efforts.

Summary

• Efficient billing practices accelerate collections, boosting investment income or reducing borrowing costs.
• Electronic billing is an increasingly essential tool for cost cutting and efficiency.
• Effective collection efforts are crucial for recovering outstanding payments.
• Good communication and clear expectations laid out in the credit application set the stage for a successful collection process.
• Collaborative and respectful relationships with customers and their accounts payable staff are vital for successful collection efforts.
• The selection of a reliable and effective collection agency is essential for resolving complex collection issues.
• It's important to embrace the reality of bad debt write-offs, as a balance between credit policy and maximizing sales and profit is essential.