By Dean Kaplan

We don’t know anyone who actually wants to make it harder to collect invoices, but here are some common issues that result in this scenario.

1. Don’t Get Good Documentation Up-Front

Verbal agreements can be very difficult and expensive to enforce. Whether it is a purchase order, signed sales order, contract, or at least an email, get in writing your customer’s agreement to what they are buying and include price, quantity, delivery and payment dates. Make sure you know the exact legal entity name that you are doing business with. Even better, get a signed credit application from your customer so you can investigate their creditworthiness and establish your legal business terms. If your customer doesn’t submit proper documentation upfront, insist on fixing this before moving forward. Otherwise you are taking a big risk that you will never get paid.

2. Repeatedly Invoice Incorrectly

Regularly sending incorrect invoices will get you to the bottom of your customer’s payables list.  Customers quickly learn they have to check everything extremely carefully, from prices, proof of delivery, missed shipments, backorders, incorrect quantities, etc. The result is delayed payment and extra work for both parties. Businesses that have this problem tend to cheat themselves – they usually don’t end up charging for all the product or service they provided because their internal systems are weak. Adding to the pain is that it often takes twice as much effort to complete this administrative task when proper procedures are not in place.

3. Don’t Listen

Why should they listen to you if you won’t listen to them?

4. Delay Resolving Disputes                    

You won’t get paid while there is an unresolved dispute. It doesn’t matter why (prioritizing new business instead of cleaning up old problems, procrastinating due to fear of not getting what you want/deserve, can’t easily find key documents, etc.), the longer it takes you to respond the longer your receivable remains outstanding. Wait long enough and it is almost impossible to collect the full amount. People’s memories change, your customer’s staff may move on to a new job, documents get harder to locate, and your customer’s objections become more entrenched.

5. Don’t Follow Up The Day After An Invoice Is Due

If your customers learn they do not have to pay on time, many of them will not. Your customers are smart. They know which vendors require adherence to terms and which ones don’t. Whenever cash is tight, it’s easy to decide who not to pay. If they ever run into serious financial problems, by the time you figure it out it may be too late.

6. Treat All Customers the Same

You get better efficiency and effectiveness through policies and procedures. But not all customers are the same. If you do not adapt to these differences, you will end up with collection problems.

If you recognize that your company has one or more of these problems, you are not alone. We see these problems every week at our collection agency. We solve most of the problems turned over to us when our clients have good documentation and move quickly. But when our clients wait too long to deal with a situation or don’t have proper paperwork, the chances of collecting their money is much lower. It doesn’t take much effort to avoid these mistakes and the payoff of not having unpaid receivables is a great reward.