Speeding Up Collections

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"Almost every credit manager has as a goal to collect balances owed quickly. Most companies now use bank lockbox remittance processing services to reduce check float, limit handling costs, and give the company access to funds deposited as quickly as possible. Almost every credit manager has a certain customer who does not mail checks to the remittance address. Often, this customer sends payments to the corporate office. This results in additional work and unnecessary delays.

Editor's Note: This article originally appeared in the Credit & Collection Manager's Letter, which Credit Today purchased in 2006.

"I recommend the following steps to correct the problem of misdirected payments:"

Don't ignore the fact that payment was sent to the wrong address. Send a simple, low-key letter to every customer that sends payments to an incorrect remittance address, asking it to correct its records.
Keep track of the customers that have received these 'friendly reminder' notices.
Follow up with a telephone call if you have to send more than one letter. Make sure the customer has corrected your company's remittance address in its accounts payable system.
If, after your letters and your telephone calls the customer continues to send payment to the wrong address, go 'up the ladder' as you would with any other collection-related problem until the matter is resolved.

"Using these ideas will help maximize your company's working capital, speed up collections, and improve DSO."

Michael Dennis,
Director of Credit

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Handling Chargebacks

"One of the most difficult tasks in credit management is to collect chargebacks and deductions. The following approach usually yields good results:"

Make sure your company is not at fault. Verify shipments were made within the time window specified on the purchase order. Was any merchandise substituted or back ordered? Was freight shipped as required on the P.O.? Were shipments made with a carrier other than the one specified? Only go after chargebacks you can prove were deducted in error.
If your case is not rock solid, don't pursue it. This will only irritate the customer.
When corresponding with customers, send all pertinent documentation. Make it as easy as possible for them to research what is necessary to get reimbursed.
Direct your correspondence to the proper person: traffic manager for freight-related deductions, co-op advertising manager for advertising, and Accounts Payable for other chargebacks.
Sometimes both parties are adamant and you are at an impasse. At that point, it's time to settle for half.

"Make sure all proper people are notified about chargebacks so they are aware of all problems. This will hopefully stop any future errors that would generate chargebacks the next time a check is cut."

Joseph Seruya
Corporate Credit Manager
Commodore Manufacturing Corp.
Brooklyn, New York
Adlip Company
Aliso Viejo, CA

Editor's Note: The above article originally appeared in the Credit & Collection Manager's Letter, a newsletter purchased by Credit Today in 2006. This article originally appeared prior to 2000.