Communication critical for improving credit and collections.(selected topic)

With a constant stream of customers to evaluate and payments to collect, it's essential to have the best possible credit and collections practices in place. Maximizing the efficiency of this core function minimizes risks, keeps cash flowing, improves customer service and, ultimately, drives business.

Fortunately, a little attention paid to bettering your practices goes a long way. Even a small increase in your collection percentage can have a dramatic impact on the bottom line. Moreover, some of the most effective steps you can take are simple ones, such as improving communication and cooperation regarding credit and collections issues. The following are low-effort ideas that can yield high-impact results.

Communicate your credit policy clearly. Your credit policy should be a tangible document, not word-of-mouth information that changes from day to day. Make sure each department affected by the credit policy is aware of it. This includes sales and marketing, customer service, operations, collections, shipping and quality control. Also, consider involving these groups in developing or revising the credit policy when appropriate. Doing so will make them feel more vested in its success.

Help ensure your policy is accepted by keeping it simple, easy to understand and accessible. Posting guidelines on your intranet will also enable employees to become familiar with your requirements, and they won't have to call credit and collections staff every time they have a question about it.

Educate all employees involved in the process. Credit and collections professionals are not the only ones who help ensure the company gets paid in a timely manner. Numerous employees are involved in converting orders to cash, and they must all understand the importance of their individual roles. Therefore, it can be helpful for credit and collections professionals to participate in training fellow employees on how to avoid common errors during the initial stages of customer contact. As anyone who works in collections knows, the 1% that is not done correctly at the outset can cause 99% of the challenges when the time comes to collect what is owed.

Encourage collaboration between sales and credit and collections. It's important for staff working in these two functional areas to recognize their interdependence and build a supportive relationship. Cooperation begins at the start of the sales process. Encourage salespeople to set payment expectations with customers and prospects when a proposal, estimate or contract is delivered. Make sure sales professionals know the most important points to cover: when the company expects to be paid, any incentives that may be available for paying early or in a preferred manner, penalties or interest on past-due accounts and policies for dealing with delinquent accounts. By presenting this information as part of the sales process, issues can be brought to the surface that, if left unaddressed, could lead to payment problems later on.

Also, encourage sales staff to follow up with customers after an invoice is sent. Some companies ask their salespeople to call clients to thank them for their business, verify that they received their bill and inquire if they have any questions. This practice allows the company to quickly address any problems with billing or customer satisfaction.