Pay Attention to Internal Collections

When most people think of the collection efforts of the credit/collection department, they think in terms of the relationship between the collector and the customer. The responsibility of the department is, after all, to protect the accounts receivable investment by reducing risk through credit management, as well as collecting outstanding invoices from delinquent customers. Needless to say, in order to have a truly successful credit/collections department, you must ensure that customers pay within terms.

While calling on customers is absolutely necessary to accomplish this task, internal collection efforts are also a big part of the job. In many cases, a collector may have to call on other individuals or departments within the company in order to gather the information needed to resolve a dispute (or remove the customer’s excuse for not paying). If the information the collector is seeking internally flows quickly and fluently, there are no problems.

Unfortunately, this is often not the case. Gathering information internally can become just as difficult (sometimes even more difficult) as collecting money from the customer. The collector finds himself in a situation where he is asking the customer for immediate payment on past due invoices, but cannot show the same level of urgency when resolving customer disputes. This can often be the result of poor communication, or even poor education and awareness of the level of urgency needed to resolve AR issues. Time is money, and there are few areas in your business where that is more evident than when collecting your company’s cash.

Educate your staff and co-workers. As a part of collector training, collectors are usually given a multitude of scenarios and are then trained to respond to all types of stall tactics designed to buy the customer more time. However, they are usually not trained on how to deal with internal delays. Getting the information needed to resolve a customer dispute can often be very difficult. In order to get this information; the collector must ask someone in sales, shipping, customer service, etc., to look into an issue they had previously considered closed. Going back to it now is going to be outside of their ordinary workflow. Many of these issues can be resolved through automation and technology, however this can be very costly to implement.

In the interim, here are a few tips that can help you increase the level of urgency internally:

• Use multiple means of communication. Email is a very popular choice for communication. Unfortunately, it is also easy to ignore, or put off until later. Mix it up. Alternate between phone, email and actual face to face meetings when possible.
• Create a prioritization system. Not all requests for information need immediate response. Some may be able to wait until the end of the week depending on the nature of the request. Others may require immediate attention.
• Maintain the integrity of the priority system. Collectors can often be over anxious and list all issues as a top priority. Abuse of the system can cause some to disregard all urgent requests.
• Effectively communicate what is needed, why it is needed, and when you need it.

Collecting information from internal customers should be approached in the same manner as collecting from your external customers. Stress urgency, and get commitments. By training your staff to handle internal delays, you are truly giving them the tools to be successful. Teamwork is essential to the collection process, and is a primary component for taking your accounts receivable performance to the next level.

Reprinted with permission by Collection Advisor, www.collectionadvisor.com, 888/610-1144.

Darin Ball has been in the Credit/Collections business for over 10 years with experience in both 3rd-party collections and 1st-party collections, as well as credit. He is a member of the NACM (National Association of Credit Managers). He is currently the supervisor of Credit and Collections for Sonoco Flexible Packaging, and has responsibility for managing and leading the credit and collection efforts for 10 manufacturing facilities throughout the United States and Canada.