Maximizing
Your Commercial Collection Efforts
The typical
commercial waste management business involves multiple business
models: front lift and rear load scheduled services, roll
off services, portable toilet services and projects services.
For commercial scheduled services, customers can include department
stores, restaurants, small stores and small businesses.
The majority
of rolloff customers are large and small contractors, roofers
and developers and they can cause serious collection problems.
Most of your scheduled service customers will not present
the same problems, although there are exceptions.
For collections
efforts to be successful, you must have in place a specific
strategy that will be applied uniformly across the administrative
operation to maintain control of your receivables. The procedure
must be well planned and methodical, and you cannot apply
it randomly. When you send a notice of imminent suspension
to your customer, you must have the procedure in place to
back up your promise.
Even
if you have only a few hundred customers, the management of
receivables and collections is a challenging job if your information
system is poorly designed. In many cases, companies are employing
two or more people to work collections, but they ignore all
but the most serious problems, typically those in the 90+
days overdue. If receivables are averaging 65 days or more,
your system is inadequate or it is being used incorrectly.
Start
With a Plan
There
are three essential aspects to the management of receivables:
1. The
design and organization of the information;
2. The collections process as managed by your company;
3. The collections process as managed by your collection agency
and your support of that agency with timely information.
The
Design/Organization of Information
The management
of collection data on your system is dependent on how well
the information has been linked, whether the correct fields
are completed, and whether they are available in the right
place, the right format and at the right time.
The first
thing you must realize is that commercial accounts frequently
involve multiple service sites, as in the case of a contractor
who is receiving rolloff service for more than one construction
site. If these accounts are independent of each other and
have their own current, 30, 60, 90 and 120 day information,
you have a serious problem; the contractor could easily continue
receiving service on one site while defaulting on another.
There
should be one billing site that represents the Accounts/Receivable
for all linked service sites. Then, if you have to suspend
service to an individual site for lack of payment, you will
actually suspend the customer, including all the other sites,
which may well speed payment of the balance.
There
are two situations where this would not apply. If you choose
to group a chain of independent franchises, you would still
preserve the individual information for each site. Or, where
a property manager for a group of independently-owned properties
receives the bill for each property, you would maintain separate
billings and forward them all to the manager.
Once
you have your customer records organized correctly, it is
time to turn your attention to your suspension procedures.
When you suspend a customer as of a certain date, that information
should pass to two critical areas: the scheduled route listing
and the dispatch ticket/work order posting program. Suspension
of a customer on the master record means scheduled services
will be cut off and, within the dispatch program, it will
keep you from creating additional tickets for suspended customers.
The
Collection Process Managed By Your Company
Once your
system is configured to identify and flag customers who have
entered the collection process, it is time to handle company
level collections efforts. If you follow the process detailed
here, you will need only one customer collections officer
to manage several thousand customers!
First,
make sure your system includes a program which will build
a list of all customers who are past due, using a minimum
balance entered by the operator as a means of sorting these
customers from the rest. The operator should have the discretionary
ability to remove customers with extenuating circumstances.
Then,
the system must produce a customer notice with the customer
name and address, amount due, date when service will be suspended,
number to call with questions, and the exact place to send
payment. If payment is not received by the notice due date,
then the customer will be suspended, and throughout the system
that customer will have the suspended status. Therefore, the
suspension will be noted on route sheets, when a ticket entry
is attempted, or when the customer contacts your service representatives.
At the
same time, the system must note the customer account with
the suspension date and status, and the system should alert
an operator that any subsequent receipt being posted is going
to a suspended account. At this point, if the account is paid
in full, the operator can remove the suspended status from
the customer account.
Your
collection officer may want to control who is removed from
suspension. In that case, you should be able to turn the option
off, a feature which should either be included with your system
software or incorporated when you install it.
There
are other tools that can also be used during the collection
process, for instance, container movement or non-movement.
If you have a restaurant customer on scheduled service, you
can leave the container and allow it to fill up, which becomes
a health problem for the restaurant and, subsequently, bad
for business. You can just about count on the fact that they
will pay up promptly.
Leaving
a full container on site can also be a problem for a stubborn,
non-paying contractor. Use this leverage as a means of getting
paid.
For a
department store, you should try the reverse strategy: move
their container so they have none. With no place to put the
cardboard and packaging, warehouse space will fill up in a
hurry, not a good situation for a business to run smoothly.
Another
method of nudging slow-paying customers is to have your company
attorney write a collection letter to those customers, before
you ever send their account to a collection agency. Many times,
receiving an attorney's letter is enough of a motivator to
make the collection process successful.
The Collection
Process Managed by Your Collections Agency and Your Support
of the Agency with Timely Information
When
dealing with severely overdue customers, it is time to bring
in the "heavy hitters" or, more accurately, your
outside collection agency. Make sure your system can build
a list of these delinquent customers, at the same time generating
a letter to the customer to explain that the account is being
turned over to the agency. Make sure the letter includes the
account number, name, address, amount due, a drop-dead date
for payment and the name of the collection agency. You should
also provide a telephone number for your company and the collection
agency.>/BLOCKQUOTE>
Once
the drop dead date arrives, use the system to generate an
electronic file with all the necessary information to assist
the collection agency with their process. Always check with
the agency for the proper format of the data.
At this
point, your system should update each of the affected customer
accounts as follows: create a credit of the open balances
and code tham as bad debt write offs, and create a bad debt
journal entry for each customer. Use this amount as a posting
reference for any recovered funds.
Even
if your customer has been turned over to the agency, you should
still consider the client as a potential good customer if
they pay the full balance.
Other
Items to Consider
Make
sure your invoice is clear for the customer. If the invoice
is confusing, they will delay payment until they can get clarification
in a phone call, or worse still, delay any decision altogether.
Offer
credit cards and ACH payments for customers to pay their balances.
Offer as many methods to pay the bill as is possible, to make
it as easy as you can. If you take credit cards, you can control
the payment process, thus reducing future collection problems.
Be as
consistent in your billing process as possible. Make sure
you bill the same time each month or each week, so customers
learn to expect, and plan for, the arrival of your bill.
Set credit
limits in order to reduce your customer's maximum liability
to you. Make sure your system includes all of the invoiced
sales as well as services completed, but not yet billed when
testing for the balance against the credit limit.
Early
payment discounts can also speed up payments. Make sure your
system provides good information to assist in the distribution
of discounts. The system should store the payment days per
customer, the discount days and discount percentages. Some
systems also allow for using a fixed discount amount. The
receipts posting program should also provide the exact amount
of the discount available for the operator when posting the
payment of the invoice.
It is
critical to your survival as a business to establish strong
collection procedures. Especially when choosing a new software
system, check to be sure of its capabilities to assist in
this process; it will help you avoid spending thousands on
patchwork solutions or, worse still, adding to staff indiscriminately
in an effort to handle the problem. Spend your money on a
good information system to ensure more cash in the bank for
years to come.
|
