Effectively managing accounts receivable has its challenges, delinquent accounts is one of them. Here's a list of nine things you can do to meet that challenge head-on. In fact, make these steps a regular part of the way you handle receivables and you'll start to see real results in terms of a decrease in the number of delinquent accounts you have to deal with.

The key element required is consistency, and consistency is built upon process. You don’t necessarily need to have an elaborate credit and collections policy manual. You do, however, have to establish and actively implement some basic processes that will ensure that you aren’t the reason your customers are paying late.

Make these steps part of your credit and collections process, and they will go a long way toward ensuring your sales actually do turn into cash in the bank.

Step #1: Decide up-front who gets credit and who doesn’t. Make a decision on how you will be paid, before you make a sale. Will you always require payment in advance, or a down payment of some percentage of the final total? Or, will you extend credit to some customers? If you’re going to extend credit, make sure you have some criteria in place to determine who gets the privilege of a loan. That’s right. When you extend credit you’re actually providing an interest-free loan to your customer. You need to develop a profile of the type of customer that deserves such a loan, and stick to it.

Step #2: Never accept a verbal order – even from a good customer. Always get it in writing. If you get something less than a formal purchase order, respond in writing with a restatement of the order, the price you will be charging, and your full terms and conditions. Have the customer sign-off, again, in writing. Then, keep all the documentation until you are paid in full. Emails can work here, but you need to have a method of storing them so you can find them quickly.

Step #3: Be sure your customer clearly understands your terms of sale. As a standard procedure, include your terms on all correspondence sent to the customer, not just on the invoice.

Step #4: Send invoices on a set schedule – either on the same day of each month, or immediately after the service is performed. Be consistent. If your customers know when to expect your invoice each month, they are better prepared to make payment on time.

Step #5: Contact your customers regularly. Develop a regular routine of ‘staying in touch’. Call your customer after the product is delivered or the service is performed to be sure they're satisfied. After you send the invoice, give them another call to see if they got it, if the invoice is accurate, and, of course, when they plan to send payment. It is very important to keep notes of these conversations for future reference. Equally important is handling any problems with the product/service or the invoice ASAP. It's great for customer relations. And, you'll also find that taking care of these things as they occur is typically much easier, and efficient, than trying to re-capture information and connect with persons involved at a later date.

Step #6: Routinely monitor your customer’s payment habits. Look specifically for irregular payment patterns and requests for extended payments. If you use credit reports, set up a schedule for updating the reports at least annually. Be prepared to adjust terms or retract the extension of credit if anything in the customer’s history is sending up warning flags.

Step #7: Immediately follow-up on delinquencies. It’s a well known fact that the probability of collecting on a past due account drops significantly with the passage of time. If possible, contact the customer as soon as the account goes past due to find out what happened. Ask for a specific date they will send payment. If they reply that “the check is in the mail”, ask for the check number. You might also suggest they send payment overnight, or offer to send a courier to pick up the payment. Their response to such suggestions will give you a good idea how serious they are about paying.

Step #8: Gradually increase the pressure for payment. Prepare a set of letters that become increasingly firm (or phone scripts if you have the manpower to make personal calls). Send these letters out at regular intervals, every week or two weeks. The first letter might be a simple reminder of your terms and the missed due date, requesting them to contact you if there is an issue. The second might alert them to the overdue interest accruing (if you charge such interest), and suggest that you will not be able to provide further service until payment is made. The third or fourth should demand payment in full by a specific date, and outline what action you will take – for instance, placing the account with a collection agency -- if you do not hear from them. (Remember, if you threaten a specific action, you must follow-through, otherwise you will lose leverage and credibility.)

Step #9: Come what may, be professional. All correspondence, including emails, should include your company name/logo, address and contact information. Proof everything carefully for typos and grammar mistakes. Also read all communications to be sent to the customer out loud before they are sent. This is a great way to be sure the e-mail, etc. is clear and says what you intended it to say. Keep all written and verbal contacts calm and business-like. Your customers will take you seriously, if they perceive you as a professional.

Nothing can guarantee you will never be faced with a delinquent account. In fact, chances are you'll see a number of them. But, making these nine practical steps a consistent part of your receivable management process will allow you to keep their number to a minimum and help you achieve long-term success for your company.

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This information is provided by ABC-Amega Inc. -- providing 1st and 3rd party commercial collection services since 1929, and collecting in more than 200 countries worldwide. For further information, contact info@abc-amega.com.