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Internal Credit Control - Billing Practices

Speed is really the key to collecting past due commercial accounts since commercial accounts depreciate more rapidly than consumer accounts. 

In planning and carrying out a billing system, a credit grantor should recognize that time is the safest refuge of any debtor. The more time they are given, the less likely they are to pay. Hence, sales documents should be explicit about payment terms, return privileges, interest charges on overdue accounts, guarantee and service costs.

Varied Collection Programs Used
Collection programs should be organized around the company’s existing facilities. A series of letters used together with an account aging spreadsheet or data printout will help to track slow-paying accounts. 

All systems should have an organized and mechanical follow-up of accounts at regular intervals, for instance, 10, 30 and 60 days past due. 

It is essential to establish regular billing and collection procedures. Follow up on every account to the point where contact—or lack of contact—with the customer indicates some alternative action should be taken.

Assist Collection from the Start
Built-in collection controls at the time of sale often assist in receivables recovery and help avoid delinquencies. These include such items as sales contracts or a well-defined vendor’s purchase order with conditions of sale clearly spelled out. Appropriate terms should be printed on sales documents (contracts, invoices, statements) clearly and without equivocation. Such terms will include notice of interest charged on overdue accounts and discounts granted for prompt payment. 

Internal control of receivables should include an aging which permits periodic assessment. This should mesh with collection routines. The break-off point for referral to professional commercial collectors should come from the aging at 60 or 90 days past due, and sometimes sooner. 

After a first statement has gone unheeded, start your collection procedure. Any program that permits three statements—or a two to three month time lag—before the first collection step is taken will result in a lower recovery ratio. 

Any procedures for handling slow-paying accounts should emphasize speed in contacting the delinquent bill payer. A company with a past-due account on you books is probably in the same condition with a number of other suppliers. The debtor may be on the verge of serious financial trouble, and the creditor who moves first is most likely to recover their money.

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