"All companies have terms, but many let customers 'fudge' on them," notes one mid-western credit manager. "Although they make statements about terms in their printed policies, they don't stick to them. If your terms say that payment is due on the tenth of the month, then on the eleventh, customers who have not paid are past due!"

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

Here is the four-phase system she uses to make sure customers pay and pay on time.

• Getting protection. Bowen insists on personal guaranties from all customers that charge orders with the company.

• Stating terms clearly. As part of the welcoming letter to new customers, she explains the company's terms (payment due on the tenth of the month) and the implications of not paying by the tenth (the customer risks having its account cut off on or before the twentieth of the month, and finance charges will be added to the account).
  Customers are asked to sign and return this letter. "Then, if we ever need to litigate, and the customer claims not to have known our terms, we can produce the signed letter," she explains.

• Reinforcing due dates. To continually impress on customers that payment is due on the tenth of the month, the statement that the customer receives each month has the due date listed after each invoice on the statement, not merely on the statement itself.
  "By having the due date next to every single invoice, it impresses on the customer the importance of paying them when they are due," explains Bowen.

• Involving the sales department. Of course, such a strict collection policy requires the full support and cooperation of the sales department. At Kraft, this is no problem, because collections are primarily the responsibility of the sales force. The collection department merely enhances these collection efforts.

• For every percent less than 80% current on their accounts, they lose 1% of their commissions (to a maximum of 15%).

• Conversely, for every percent over 80% current they gain 1% on their commissions (to a maximum of 15%).

• For accounts that the salesperson does not plan to visit by that date, the collector reminds the customer to mail the check.

• For accounts that the salesperson does plan to visit, the collector will remind the customer to have the check ready when the salesperson arrives.

• Each Monday, collectors provide their salespeople with aged trial balances, so they know where they stand with their customers.

• Collectors and salespeople stay in touch with one another via phone and voice mail. Collectors report problems to salespeople, and alert salespeople when payments have been received.

• When customers fail to make their payments by the tenth, the collectors notify their salespeople, who then remind customers that their accounts are in jeopardy of being put on hold at that point.