The Accounts Receivables Department is often overlooked, but a vital part of any business. Whether your company is a small mom-and-pop shop or a multi-billion-dollar enterprise, AR is key to profit. If you see your profit margin declining, take a close look at your AR process. There may be some improvements you can make.

As a pre-collection platform, our goal is to drive profit without the fees of collections. The first place to start is to turn your AR process into a streamlined machine. Automation, analytics and acting on delinquent accounts quickly will not only grow your profit margin, it will also make the job of the accounts receivables department much easier.

Track the Aging of Your Accounts

What do you do when an account goes delinquent? Does it get put in a file folder to be forgotten later?

The age of the account is one of the most important things when trying to collect the debt. The probability of collecting an account after 90 days decreases drastically, so you want to stay on top of the age of your accounts.

The simplest way to keep track of the age of your accounts is to set up a report. The goal is to have a list of all accounts, separated by age. We recommend the following age groups:

• 0-30 days
• 31-60 days
• 61-90 days
• 90 days +

There are many companies that offer AR software to help you manage your accounts and their age. Do some research and find what works for your company’s needs and budget and get started today. It will save you time and money in the long run.

Decide When to Start Collection Attempts (And Stick to It)

Consistency is key in everything, including AR. Being hesitant when accounts go delinquent gives your clients/customers the idea that you’re not serious about making them pay.

When you decide to start the process is up to you, although we recommend starting ASAP, within the first 30 days.

The sooner you reach out to debtors, the more likely you’ll receive payment. Some companies like to give some grace, and that’s fine, just know that you have to draw the line somewhere and don’t falter from it.

Add Collection Language to Your Contracts/Invoices

If you have to send accounts to collections, you foot the bill for it, meaning you don’t get the total amount that’s owed to you. Unless, of course, you add collection language to the paperwork for your clients.

Many companies don’t even think about doing this, specifically smaller businesses. But it’s an option that saves you over time because most businesses have delinquent accounts at some point, even if they’re not frequent.

Another great thing about collection fee language is the added pressure it puts on the client/customer to pay. If they know up front they are responsible for collection fees, they’ll be more inclined to pay their bill with you so that doesn’t happen.

Save Money and Time with Last Demand

When the time comes to pull the trigger and reach out to debtors, a collection agency doesn’t have to be your first step.

There are pre-collection platforms that can help you collect and save you money in collection fees. (We’re kind of partial to Last Demand of course.)

Last Demand is a platform where you pay a small fee per claim, and we handle the outreach. It is a first-party service, so the letters come on behalf of your company, not us. We have the ability to contact with the debtor on multiple channels, because every debtor prefers to be communicated with differently.

The debtor is given basic information about the debt they owe and have the ability to log into a portal to pay in full or set up payment options.

The great thing about this option is that you keep 100% of the amount collected. The fee per claim is miniscule compared to commission rates you would pay with a debt collection agency.

You have the option to send the account receivable if the debtor does not respond to our outreach. Unfortunately, some debtors don’t react until they know you’ve sent them to collections, and in those cases, you don’t have to search for a collection agency to tackle those for you. We’ll send them over for you.

Many companies don’t even know they have an AR problem. That’s the first sign that there is one. If you follow the steps above, you can get your receivables under control, and your company will see the profit it deserves.