Policy

The company boss should make it clear to all relevant staff that the company is in busines to earn cash from customers and that a sale is not complete until it is paid for. All staff have a part to play. For example, account queries are not low-level clerical matters. They are complaints from unhappy customers who feel let down. They justify non-payment and should be resolved in 7 days as prime customer service priorities.

Targets

The rate of cash inflow should be reliably in line with sales made. Work to a monthly Cash Target to achieve a specific Days Sales Outstanding (DSO) ratio which measures Total Debtors against Total Sales made. There should be constant pressure to reduce DSO, which is the average time customers take to pay. Secondary targets can be set to reduce certain kinds of debt; e.g. overdue 60 days above £500.

Resources

Cash collection is highly competitive. Do not skimp on the rescources needed. A trained collector can only control about 600 accounts, making about 20 calls per day, amongst other work. Inadequate staffing rebounds in interest expense while waiting for slow payments plus some painful bad debts. It usually pays to separate collection from ledger work - the skills and time priorities are different.

Timetable

Every business should have a timetable for following up accounts too small to telephone economically, showing what to do and when, if the previous action has failed. See example below.

(Total time for revenue = 74 days)

This example may be seen as too tough by some and too lenient by others. What matters is that sellers have their own version.
Involve senior people as needed; aim requests for payment further up the hierarchy if normal contacts fail. Notify sales staff before stopping supplies - they may be able to get the payment. The Financial Director should sign Final Demands. Managing Directors should be kept informed of problem customers and asked not to override procedures.