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Why should you chase your customers before the due date of your invoices?


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Bertrand Mazuir Credit Manager
What are the advantages to start the collection process before the invoices due dates? How to perform an efficient collection prior due date?

Any commercial relationship is based on mutual commitments shared between the seller and the buyer. The buyer undertakes to pay the price of the service or equipment delivered on the date specified in the contract and invoices.

However, the buyer frequently forgets, at least temporarily, this commitment. Several reasons led him to this:

  • The business relationship established by nature a favorable balance of power in favor of the buyer who takes advantage of it consciously or unconsciously.
  • Cash flow difficulties or administrative complexity are pushing companies to delay payments to suppliers. Accounts payable are the only funding ressource that is free.
  • It is easier to get cash from suppliers debt rather than bank credit especially in the current banking environment (Basel 3).
  • Non strict compliance with suppliers due dates does not imply the immediate consequences applied by the Bankers (bank charges, blocking lines of credit ... etc.).
The purpose of a debt collection department is to counteract this reality and to reach a balance profitable for the business relationship, so to get the customer to honor his commitment. The goal of debt collection is very simple: get the payment of invoices to their due date.
In order to have the best chance to achieve this goal, it is key to do an action before the due date of the bills, that is called a pre-chase reminder! Otherwise, achieving the objective would be based on chance, which is not satisfactory.

Moreover, this type of recovery action has a number of significant advantages:

  • It allows you to start the relationship with the buyer on a soft and very customer-oriented base as the client is not overdue yet.
  • It promotes early identification of any dispute which would prevent the payment of the invoice. It may thus be treated and resolved quickly to increase customer satisfaction and get paid quickly.
  • If all goes well, a promise to pay is given by the buyer that will be recalled if he does not comply with it, initiating the collection process in funnel.

How to do a collection action prior due date?

The recovery action takes place between -15 days to -5 days compared to the invoice due date. Since it is made in advance, the recovery is very customer satisfaction oriented.

The interlocutors are depending on the size of the company: accounts payable, general accounting, the purchase manager, the financial director or business manager.

The tone is friendly. The content mainly includes leading questions like: Is all well on the bills? Have you received the material and the invoice? If yes, can you confirm the payment by the due date? Yes? By what payment mean?

The media used are mainly telephone and email. The choice between these two is determined by the type of account.

For example, if the account has two bills with a big amount, phone call follow-up is recommended. On the contrary, if it contains a hundred of bills, it will be difficult to discuss each of them by phone. Email is preferred. Remember that email is the collection media that has the best response rate.

I hope I have convinced you of the value of pre-chase reminders as the first step of the collection process with most of B to B customers.
It has only advantages. The opponents of this type of action are often those who are afraid of upsetting or losing customers because of this action. This is completely unfounded since it is made by a person with a sense of customer relations.



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Sending statement of accounts in advance will make sure that customer has received the invoices on time, In addition that will indicate to customer that amount due date according to Statement, if any dispiute in the invoice will help to action immediatly, Chasing in adavnce is good system to get the payment according to credit terms.
From :Nilantha
I think its taking the most appropriate approach for your client/customer. Know the right way and point to contact them to strike a fair balance. There are some of our clients we would NOT approach before due date, even for a simple "customer service" type call referred to above, such is the sensitivity. Equally, any exceptional fees/invoices we issue to a non-sensitive client might be gently enquired about via their approval heirarchy before the due date. I certainly dont advocate an automatic advance follow up process accross the ledger. Perhaps this is going off topic a bit, I prefer to ensure that we get it right first time. i.e. send the client the invoice value they were expecting, at the point that work was complete and was done to their satisfaction. There is no point sending an invoice for a different amount to their expectations and hoping they dont query it!
From :Mark
This is one of the key workflows we implement with one of our projects. I think a key piece to this is that the size of the invoice is a major consideration. A 60 dollar invoice would not be worth an expensive customer touch. But a 100K invoice certainly would. And in my experience, the larger the invoice the more the chance there was a problem. Proactively managing those can really improve cash flow.
From :Chris
Hello Bertrand, I use to work for Schneider Electric IT UK in the Credit control department. It was very important for us to ensure that especially our large customers had received the invoices, so that was first step, needed to understand their approval process, as well as how many payment runs they had in the month. We did not want any last minute surprise that they did not have the invoice, or invoiced was not approved, hence invoice not paid. This would impact majorly if the invoice was for large value. With project work, on many occasion, the invoice would be on hold due something going wrong on site, the systems not working and customers refuses to pay. We than had few weeks to resolve queries if the invoice/s were not approved. We had time to to liase with project managers, Sales team and also the customer to resolve any hold on payments. To chase before due date would not be a demand payment, it would be a proactive call just to ensure they have received the invoice, its on thier system, all payments are in place. I think above steps were important for me to acheive good cash collection targets and to be proactive for large projects.
From :Bindal
Hello Bertrand, I use to work for Schneider Electric IT UK in the Credit control department. It was very important for us to ensure that especially our large customers had received the invoices, so that was first step, needed to understand their approval process, as well as how many payment runs they had in the month. We did not want any last minute surprise that they did not have the invoice, or invoiced was not approved, hence invoice not paid. This would impact majorly if the invoice was for large value. With project work, on many occasion, the invoice would be on hold due something going wrong on site, the systems not working and customers refuses to pay. We than had few weeks to resolve queries if the invoice/s were not approved. We had time to to liase with project managers, Sales team and also the customer to resolve any hold on payments. To chase before due date would not be a demand payment, it would be a proactive call just to ensure they have received the invoice, its on thier system, all payments are in place. I think above steps were important for me to acheive good cash collection targets and to be proactive for large projects.
From :Bindal
Chasing customer before the due date will avoid the customer's alibi such as non-receiving of invoices, quantity and quality issues, etc...if these can be resolve ahead of time, AR will be collected on time.
From :Benjie
I have had my collectors do random calls to customers to determine whether they had received our invoices and would they be paying them on due date. The collectors would indicate that they are doing their monthly cash forecasting and if any delay in payment, they would adjust the amount of cash they anticipated to collect by month-end. As I said this is random and they would not call the same customer two months in a row so that they could remain on good terms and not have the customer think they where pushy.
From :Andy
Chasing your customers before the maturity of the invoices is a proactive measures and to make sure that you and your customers are inthe same page on what is open in the receivables. This prevent delays sometimes customers have questions or dispute on the billing calling them ahead of time to make sure that your invoices are their systems. Especially big dollar invoices make sure to call your customer as a courtesy call.
From :Gina Malone
I agree with most your comments. just to add on, i find calling the debtor before the due date important especially were the amount involved will have a huge bearing on one`s cash flow forecast. i am operating in an economy where cash budgeting is the order of the day and failure to collect on time will result in failure to meet critical obligations.
From :John
Hello Bertrand, My comment is as a business owner and not a credit professional. You provided me goods and/or services on open account terms (I hope) based on my character and proven ability to pay my debts timely. We agreed to price and terms (In the U.S. that's called a contract and governed by Article 2 of the Uniform Commercial Code with the exception of the state of Louisiana). Any "pre-collection" on your part prior to the agreed due date is a violation of the trust we contracted. If you want to confirm that I received the product/service, that's fine. But the minute you want to discuss how and when I'm going to pay, well my friend that should have been discussed before you made the sale. We call that credit analysis. So here's what happens on my end, after you and I have spoken, I call your sales manager and inform he/she to never darken my door again and I'm giving my business to another firm who knows the meaning of honoring the contract and also can recognize a good customer when they have one. So what you've created by this pro-active nonsense is losing more profitable sales for your company and sending a good customer to your competitor. Keep this up for any length of time and your company will have a prominent position on bankruptcy dot com and you're looking for another position. Also, for any of your followers who think this is a good system to get the payment in accord with credit terms. The reality (read that to say legal) is that I don't owe you any payment until the due date and until that date any attempt to collect the invoice amount can be considered harassment.
From :David Balovich
Hi Bertrand, The first step in the pre-dunning process has nothing to do with dunning per se. The first thing to do is ensure your organization is compliant with the notion that an invoice well prepared is half collected. That is - MAKE CERTAIN the documents you are deploying are payable by the AP department with whom you are dealing. Secondly, identify those customers where the largest impact will be felt. Identify the highest in sales - and then sort them by the degree of terms breach (on average over a reasonable span). This will help you build customer specific strategies. Third, begin negotiations with these customers - ask them - what will it take to have you pay our invoices at the terms as defined on the invoice....this will tell you if there is a bridge to be made in negotiating with your customer. At this stage it is critical that you have the right people in your company speaking with the right people at your customer's company. Fourth, start managing your collection activities by EXCEPTION only. You cannot deploy your collection resources against 100% of the invoices you produce - If you do, you are doing something wrong. You need to ensure your collection activities are put toward the EXCEPTIONAL invoices that do not get paid. Invoices fail to get paid for two reasons: The customer won't pay or the customer can't pay. You take the first part of this action to DECREASE the amount of "WON'T PAYS". The can't pays should very much be the minority - If the customer can't pay, your actions are simply around managing your exposure (collateral, or CIA) - or exiting the relationship. In any case - the collectors should be deployed only against the exceptions where something in the process has failed (wrong PO, POD required, Quantity shorted, Quality issue, etc...)
From :Kyle
It is extremely important to contact both your major customers and also those customers with any large invoices prior to due date. It's good customer service and it allows any queries or problems to be resolved before the due date. So often customers don't let you know there is a problem until you ring to collect the money By contacting them early, you have an opportunity to meet the issue head on and resolve it before the due date for payment.
From :Stephen
I work for Cforia Software, which is an AR Automation Software provider. We had a customer setup our system to send out a "Courtesy Letter" to their largest orders ten days before the due date. The Courtesy Letter starts by thanking the customer for their business. It includes a copy of the invoice and asks the customer to check that the order has been delivered to their satisfaction. The letter tells the customer that they will be getting a call in three days to follow up on the order to assure that everything is satisfactory. The scheduled follow up call three days later surfaced any problems the customer had with their order. The Collector quite often has to put on their customer service hat during this calls to keep the customer happy. At the end of the call, the collector reminded the customer that the invoice is due in 7 days. This company found that instead of getting complaint letters they started getting checks instead. This single process change sped up payments to reduce net receivables by $500K in the first year by converting it to cash in the bank. There are several dynamics in place here: - The "Courtesy Letter" reminded the AP person to get acknowledgement that the order had been received and to confirm that everything is okay for payment. - This process resolved problems faster to speed up the resolution which could have been a barrier to payment. - The tone of this campaign was one of a great customer service organization, not a heavy handed collector. - This process would be particularly effective in Europe where instead of getting short payments like the USA, the entire payment is held until the invoice has been corrected.
From :Brad Wentzel
Can you provide a reference for your statement, "email is the collection media that has the best response rate"? Hi, it comes from a study made in France about collection media.
From :John
In reading several of the posts and having held positions on both sides of the process and currently in an Accounts Payable role, I would those involved in Accounts Receivable, collections, or early collections to consider some the following suggestion ideas for best practices. 1) E-mail connection - I have found it invaluable to have a good connection via e-mail and phone with my vendors, and if possible with the agents handling the account. 2) E-Mail invoicing - Another valuable asset for getting bills paid early and to ensure the vendor has received them, or if there is a discrepancy. It saves compiling time, postage, printing for the envelopes, etc. Dare to compare, based on your vendors do you REALLY need to mail statements monthly or maybe just to select customers for varying needs. 3) Mailed Statements - PLEASE PLEASE PLEASE Make sure account, invoice(s), date and amount information is on any statement you mail. Some vendors think that this may make the customer call to inquire about it. Honestly it does not. I have had many conversations with fellow Accounts Payable Agent and Managers, most commented the just end up throwing them out. If you are willing to go through the process, and cost of mailing a statement, with no relevant information on it, why not have something useful on it to the vendor your wanting to collect from. If I receive a statement like this, only make that call and only to find it is for an invoice that was paid recently, and it may not be posted yet, it becomes quite irritating. Where if I had known what the statement was regarding I would have been able to verify what it was from and decide if both our companies time needed to be utilized in the matter. 4) Credit Card acceptance, and on-line invoice paying - I currently have about 15-20% of vendors accepting credit cards for payment on term accounts. Depending on your cash flow needs, it might be a viable option to the costs you may have from Credit card fees. Factor in cost of the agent time for collections, mail, printing and phone costs as well. Thank You to everyone for taking the interest in this post.
From :Douglas Brunson
I actually do this frequently where I am going in to bail out companies who have cashflow problems and need immediate response. As we know dipsutes take time to resolve after the event, and people increasingly use only two payment runs a month. I take the attitude, if the item billed is large value or a complex invoice, phoning that debtor a few days, may be a week before due date, is the best way of finding out whether: 1. There is a dispute on the invoice, which would need clearing up after due date and may take time thereafter. As we know it is more likely that difficult debt tends to age more, and becomes neglected. 2. Being able to secure a due date, and ensure that the invoice has been received without dispute. 3. If there are disputes, getting these resolved or speaking to the party refusing authorisation of the invoice directly as opposed to the matter hovering around in someone's "In tray".
From :Chris Richards- The Credit Consultancy Limited

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