When It’s “Show Me the Money!” Time

We all think that selling is the hardest part of business. That’s certainly true, but ask anyone who does it and you’ll find that collections can be just as challenging.

Just as making the sale can be a tough row to hoe, a sale is really not a sale until payment has been collected.

Part of my job entails making collections and I’ll admit I wasn’t too happy about that, at first. However, I’ve come to learn that with a “business” frame of mind and some useful tools to use, it is not that hard.

To this end, and in the hope of making this important task less of a challenge, The PEiR Group has put together some “collection guidelines” for you to use.

Your company should have a “Financial Performance” goal in place. Something along the lines of:

DSO – Days Sales Outstanding (45 or below)
A/R: Accounts in the 90/120+ column not to exceed 10% of total A/R
Consider charging finance charges on all past due accounts
Mandatory monthly “Credit & Collection” meetings
Create an action plan for top 10 delinquent accounts


At the beginning of each month, I print an aged receivables report. With this, I create a “monthly collection goal” report.
Using the actual receivables (current, 30 days, 60 days, 90 days and 120 days past due), I apply the following formula…

70% of current, 30 days and 60 days past due
50% of 90 and 120 days past due

Okay, now, I have my goal for the month! Now what?

I start by looking at accounts more than 40 days past due and then I…

Call the customer, advise them the account is past due (always assume your customer is not aware the account is past due)
Ask if there any problems with the product
Ask when can payment be expected
Document all conversations

If payment is not received by agreed upon date, I follow up with a “friendly reminder” letter (collection letter # 1). I attach copies of past due invoices along with the letter.

If payment continues to be past due and my attempts at contacting the customer fail, I send another letter (collection letter # 2).

Follow up is critical after each letter is sent. If all efforts have been exhausted, I review the account with my account manager and sales manager. Together we make a business decision to resolve the issue, either by handing the account over to collections or by working with the customer in a way that is acceptable to both parties.

It is very important to remember, especially during these difficult economic times, that it is beneficial in most cases to work out a payment plan with your valued customer.


Note: Samples of the “collection” letters can be found on the PEiR Group web site…


Janet Benson