Collecting Overdue Accounts Receivable

Collecting Overdue Accounts Receivable

overdue accounts receivable

Corporations need to develop the right knowledge and processes to manage the problem of collecting overdue accounts receivable successfully. The failure to prevent and deal with non-paying customers has a devastating impact on small businesses. A company can experience the inability to succeed in circumstances where cash fails to be collected on time or not at all.

Do Some Research:

Before deciding whether to onboard a new customer, research them, and determine whether their organization is genuine. Search to discover info that might have been left by others who have worked with them. This work in advance can prevent a business much concern in the future. Make certain possible clients are reliable and operate with upstanding service practices.

Payment Process:

Clients need to know what is financially anticipated from them. Their payment plan must be simple and reasonable. It is helpful to set up recurring billing processes. Also, think about whether it is smart for certain customers to make payment in advance or upon completion. This determination can be made based on their creditworthiness. It is advantageous, for all entities involved, to add incentive for advance payment. An incentive to avoid trying to collect overdue accounts receivable is to supply a discount for customers that wish to pay their billings before the due date. 

Vice versa, customers that fail to make payment within time requirements could be assessed interest charges. Consider whether or not it is smart for certain clients to pay upfront or upon fulfillment. Offering a discount rate for customers who pay their invoices prior to their deadline could be a helpful business practice. Conversely, customers who do not make attempts to provide payments when due will be assessed interest costs.

Binding Contract:

Developing a written agreement for a prospective client to execute is the top method to guarantee a client’s obligation. A contract ends up being the primary step in guaranteeing a mutually truthful company relationship. Ensure to have an attorney prepare the legal document. In this manner, a company can make certain their agreement consists of the necessary elements. If using a lawyer for such a job is not an alternative, consider using a small business contract form template (ie. available online).

Maintaining Quality Files and Relationships:

Monitor each client with excellent detail. When accounts are kept track of, it is much easier to predict their habits reliably and, most critically, to forecast when they may fail to meet A/R payments on time. Issues are often dealt with and avoided entirely if a business arrangement is developed with shared regard and understanding.

Using a 3rd party to Factor Accounts Receivable and collections:

If managing the collection of A/R invoices is too disruptive to running the business and creating a cash flow burden, consider engaging a 3rd party to finance and manage your A/R. There are a number of Accounts Receivable Factoring options in the market – some that will even take the job of collections off your hands.

Dealing with Non-Payment


Courteous Reminder:

If a client fails to remit payment on an invoice on time, the best option is to move quickly with a simple reminder. Be sure to take into account that the customer may not have actually received the billing in question. It is useful to look at an account’s previous payment routines before making determinations.

Formal Notice:

Accounts that take longer than sixty days to remit payment for their arrears invoices require extra care. After numerous friendly notices, construct a courteous and honest email, noting the issues and significant concerns that a past due receivable causes. Send notice to the client that it will not be possible to benefit from your terms of service if payment is not arranged immediately.

Decisive Legal Steps:

After ninety or so days of reminders and a strong warning, legal steps might be needed. Taking it to the courts should be avoided because the costs of taking a customer to court often surpass the billing amount outstanding. A claim in small claims court could be the exception. In this court, a claim can be made on unpaid invoices less than $35,000 (in Ontario, varies by jurisdiction), and expenses are typically considerably less than other court actions. That said, there are alternative actions that can be taken, which are often effective prior to resorting to the courts.

Accounts Receivable Collection Resources:

Below are links to some additional resources about improving A/R collections:

City National Bank – 7 Tips to Improve AR Collection

Vanguard Systems – How to Speed Up Your AR Collection Process

More Posts

Accounts receivable factoring

Accounts Receivable (A/R) Factoring Accounts Receivable Factoring is a form of Asset-Based Financing that helps a company gain access to capital through advances against their customer invoices. A/R Factoring Companies can provide high advances and competitive rates. They can deal with most markets/industries and can work diligently to set up your access to funds rapidly.

Preparing for Business Loans

Preparing for Business Loans While the application procedure for getting a commercial loan is rather straightforward, there are a number of steps to take ahead of completing your loan application. In order to increase the odds that a loan provider accepts your request for financial assistance, consider doing the following. Research Several Loan Providers There

What is Asset-Based Financing?

What is Asset-Based Financing? The majority of Asset-Based Loans are structured to operate like either a credit line or a term loan. The actual structure is based on the underlying assets that your company can select to fund. Businesses can generally finance four kinds of commercial assets: accounts receivable, inventory, machinery, and equipment. What are

Funding Canada

Contact Info
Coming Soon

We are working on an on-line credit application form to help streamline the process for companies seeking financing.

Please contact us to stay in touch!

Scroll to Top