Get paid by customers at the due date of invoices is vital for any business. This is the main objective of Credit Management department.
The use of collection scenarios (also called collection process or workflow) adapted to each situation provides the best results and allows to improve your company's cash and profitability.
As the objective it to get paid for the due date of the invoice, the first dunning action takes place before the due date to ensure that nothing shall prevent the payment of the invoice and to get a promise to pay.
This action allows to identify early a dispute (administrative, quality issue ...) if any in order to resolve it as quick as possible.
If payment is not made at the promise date, collection actions are getting stronger as the time passes in order to push your client into a corner and maximize your chances to be paid.
In the opposite case and if you don't manage to get paid, these reminders will be a proof of your good faith during a legal procedure against your customer.
The reminders must be neutral and professional and thus contribute to increase the credibility of your company. Ideally, they are carried out by a specialized collection department.
A lax recovery process is harmful and does not allow to preserve the commercial relationship. The same rule applies to mass reminders (letters - standard e-mails sent indiscriminately to all customers) that do not increase the probability of being paid and may decrease your credibility.
It consists of a succession of phases: pre-dunning, level 1, level 2, level 3, which are more and more firm and formalized as time passes. The collection process is a framework in which the collector has some flexibility based on his interactions with his client. However, any "friendly" recovery process has a end. In case of unjustified unpaid beyond level 3, the amicable action ends to become contentious.
The search for the right customer contact is an essential condition for the effectiveness of the recovery actions. The right interlocutor is someone who will be able to bring information, solve internal problems, and validate the payment. In some cases, there can be several "right interlocutor" when invoice validation must go through a long validation process.
Be courteous and factual in all case with your late customers while becoming stronger as the delay of payment increases.
Keep a written history of all your reminders. This will allow you to be more relevant on the dunning sequence and to remind your customer of his previous commitments. Moreover, you will have to provide proof of your reminders in case of legal action opened against your customer for unpaid invoices.
The phone and emails are the most effective communication mode to chase up your customers. However, each agreement / commitment must be confirmed in writing (email, letter) in order to ensure that the buyer is on the same level of information. If he doesn't respect his commitment, dunning letters with acknowledge of receipt has to be sent to put pressure on him and to formalize the collection action.
The bad faith of the debtor or the insolvency and cash flow problems are not the only root causes of unpaid bills. An important part is due to problems that must be solved: administrative or quality disputes, communication problems, etc. In this case, the objective is to clearly indentify and resolve the problem as quickly as possible before requiring the payment again.
Read also following tutorials (non exhaustive list):
The use of collection scenarios (also called collection process or workflow) adapted to each situation provides the best results and allows to improve your company's cash and profitability.
As the objective it to get paid for the due date of the invoice, the first dunning action takes place before the due date to ensure that nothing shall prevent the payment of the invoice and to get a promise to pay.
This action allows to identify early a dispute (administrative, quality issue ...) if any in order to resolve it as quick as possible.
If payment is not made at the promise date, collection actions are getting stronger as the time passes in order to push your client into a corner and maximize your chances to be paid.
In the opposite case and if you don't manage to get paid, these reminders will be a proof of your good faith during a legal procedure against your customer.
The reminders must be neutral and professional and thus contribute to increase the credibility of your company. Ideally, they are carried out by a specialized collection department.-
Cash collection in My DSO Manager
Cash collection is central in My DSO Manager. The Saas software allows to apply several collection scenarios according to customers' type and to manage actions to do in a collection agenda.
The tool dynamically creates dunning templates (e-mails, letters, SMS, ...) for each customer that can be created in the settings and customized when you send them.
It also offers innovative features such as interactive e-mails and automatic actions.
Following the customer feedback, a status and a comment are associated with the invoices, thus allowing a traceability of all the exchanges with your customers. See more with the online demo.
Collection process
The collection process is based on the due date. It defines a time frame in which the amicable recovery is carried out. It has a beginning and a end that occurs when the invoice is paid or in case of contentious after the sending of the formal notice.It consists of a succession of phases: pre-dunning, level 1, level 2, level 3, which are more and more firm and formalized as time passes.
The collection process is a framework in which the collector has some flexibility based on his interactions with his client. However, any "friendly" recovery process has a end. In case of unjustified unpaid beyond level 3, the amicable action ends to become contentious.
The different stages of the recovery scenario
The search for the right customer contact is an essential condition for the effectiveness of the recovery actions. The right interlocutor is someone who will be able to bring information, solve internal problems, and validate the payment. In some cases, there can be several "right interlocutor" when invoice validation must go through a long validation process. Be courteous and factual in all case with your late customers while becoming stronger as the delay of payment increases. Keep a written history of all your reminders. This will allow you to be more relevant on the dunning sequence and to remind your customer of his previous commitments. Moreover, you will have to provide proof of your reminders in case of legal action opened against your customer for unpaid invoices. The phone and emails are the most effective communication mode to chase up your customers. However, each agreement / commitment must be confirmed in writing (email, letter) in order to ensure that the buyer is on the same level of information. If he doesn't respect his commitment, dunning letters with acknowledge of receipt has to be sent to put pressure on him and to formalize the collection action.
The bad faith of the debtor or the insolvency and cash flow problems are not the only root causes of unpaid bills. An important part is due to problems that must be solved: administrative or quality disputes, communication problems, etc. In this case, the objective is to clearly indentify and resolve the problem as quickly as possible before requiring the payment again.Several types of payers
It is advantageous to adapt its recovery to the debtor by assigning a profile of payer. We distinguish seven main categories of payers:- The negligent payer, still waiting to be chased up to pay.
A quick reminder (ideally before due date), commercial oriented, has to be done. - The bad payer, trying to win few weeks (or months) of cash by delaying the payment of bills.
Chase him up firmly at short intervals to make him understand the seriousness of your management. Quickly send a formal notice as simple stimulus will have no other effect than to convince him that he still has time before paying. - The insolvent payer, can not pay you for the time because its financial difficulties.
Be demanding in your recovery and even accept a schedule of payment (always with immediate partial payment). Suppliers least present in the collection will be the last to be paid! - The administrative payer, which includes many large public and private structures. Administrative complexity "drown" your collection. The letters sent arrive nowhere ... etc.
Make the effort to understand the internal invoices validation process. Tie relationships with key people who will help you in resolving nodes that are sure to delay the regulations of your bills. - The "dispute" payer, which invokes a systematic dispute valid or not to avoid paying your invoices. Be accurate in your recovery by providing timely evidence of the due date of your bills. Then proceed without delay to the higher speed (letters with acknowledgment of receipt) to make him understand that you are not fooled.
- The automatic payer, with whom you accept a payment method type automatic direct debit.
No recovery action is needed except statements of account to be sent before due dates. - The good payer, the payment will automatically arrives the day of the due date of your bills, or even before.
In this case the recovery is unnecessary.
Collection letter prior due date
See all the tools 
