With the end of 2015 almost upon us, this is a great time to review past due accounts receivable to determine the best course of action. Some businesses have a monthly and even weekly process whereby past due accounts are analyzed for proper action. These companies make decisions about collections on an ongoing basis. However many companies do not have a formal constant periodic review process to manage and handle past due amounts. With the end of the year upon us, this is a great time to formalize a monthly past due accounts receivable process. Below are some suggestions as to how to put such a process into place.
- Dedicate a person in your organization to be responsible to review all past due accounts monthly (“Account Review Person”).
- Plan a year end and then a monthly one hour meeting wherein the Account Review Person makes recommendations to management on how to handle every past due account.
- The recommendations made by the Account Review Person for each account should fall into one of the following categories.
- Continue with internal collection activity.
- Write the past due amount off as not collectible.
- Send the past due file to a third party like the TCLG for external collection efforts.
- At and the end of each monthly meeting management and The Account Review Person should agree on the exact course of action for each past due account and it should be the responsibility of the Account Review Person to follow up and make sure the agreed upon action is taken for each and every account. These actions are then reviewed and analyzed at the next monthly meeting.
Monthly and year end collection status and update meetings are essential for every organization that extends credit to customers.
Every organization from a small business to a large international company needs to put in place a systematic review process whereby past due accounts are analyzed monthly to ascertain the proper course of action necessary to take to maximize collections.