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FAQ on Credit Control: Prioritising Collections

Prioritising collection activity

What advice can you give me with regards to asking for money? I’m sure I’m owed lots of money but I send so many invoices, that it is becoming increasingly hard to chase them all?

The trick is to know how to plan invoice collection. Use the Pareto Principle (80-20 rule); that is, often 20% of your customers will account for 80% of the overall money owed to you.

Prioritise

Focus on calling your customers based on the invoices with the highest value. There is simple reasoning behind this, you will get more money paid to you for your one call. Ensure you have all information ready prior to this call so that any questions that pop up during your conversation can be answered straight away, avoiding delays to you in getting paid. Preparation beforehand will also increase your confidence in handling the call by having adequate knowledge of the situation to be able to discuss a solution; don’t end a conversation without plans for a follow up call if the issue is not resolved from the first call.

For smaller value invoices, use a letter or email cycle to collect payments. Most accounts software has the facility to set up an automatic letter cycle, to send three letters out with a pre-determined time gap in between. Click to see our tips on how to produce effective collection letters.

In all cases, call the client prior to sending a final demand to ensure you have sent any letters to the correct address and potentially rescue a business relationship before any court action is taken.

Plan

Set aside time each week in which to focus on your payment collections.

Everyone will plan their week differently but by ensuring you have set aside time to: take stock of all payments due, make calls, send emails as well as writing and sending your collection letters, you will find that you can keep track of which customers you need to chase much more easily. You need to remain flexible to return calls when agreed or when the finance contact is available.

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