There is no cure for getting debtors to start making their payments on time. An accounts receivable manager has to be persistent, patient, and dedicated to getting delinquent accounts back on track. The work is never as simple as it seems, and every A/R manager has to follow certain steps to succeed at the job.
Establish a Credit Limit
Set a credit limit for each customer to prevent overspending and reduce the accumulation of debts. This limit is a preventative measure to prevent a financial disaster from happening in the first place. Over time, as the client shows greater promise in paying off a debt, the A/R manager should provide the option to increase the credit limit.
Review A/R Aging Reports
At least once a month, generate accounts receivable aging report to review the full list of unpaid invoices that include the outstanding balances. This report assists managers as they provide collections and calculate financial reports about the company.
Improve Collections Tactics
Improve on the methods that you use to address delinquent accounts. Many debtors will deliberately avoid answering calls and emails that they receive from collections agencies. Change your approaches to show more sympathy to individual situations. One technique is to provide qualifying clients with a wide range of payment options, such as payment plans and forbearance periods.
Reduce Penalties
Owners of delinquent accounts are less likely to pay if they face multiple penalties. Adding more penalties to their existing debts will not force them to make payments. Unless a court order is made, the debtors are not scared into paying when they are penalized.
Increase Incentives
Increase the number of incentives that are given to clients who make on-time payments to their accounts. Every customer is motivated by rewards that are given for good behavior. Examples of A/R payment incentives include discounts and deadline extensions. Overall, rewarding customers for good payment behaviors is more effective than punishing them for failing to make payments.
Every account receivable management company has different strategies for fixing unpaid accounts. Some strategies work for some companies but not for others. One strategy may work one year but fail to bring results the next year. Every manager must work continuously on finding the right methods to resolve their A/R issues.