Debt Collection and Cash Flow


A client company had problems collecting debts. Part of the problem was that it had a large number of small value credit sales. Personal cheques were often received from business customers and it was difficult to match the receipts to the outstanding invoices. Over time the sales ledger on the client’s computerised accounting system had got into a muddle. As everyone in the company knew that the aged debtors listing contained a lot of mistakes they were disregarding it and not chasing up genuine outstanding debts.

We started by persuading the client to introduce a new policy whereby payment had to be made with the order for all sales under £150 in value. Credit and switch cards were accepted by the client which reduced the problems of implementing this strategy. The layout of the sale invoices was changed to incorporate a “tear off” remittance advice, to be returned with the cheque, which showed the invoice and sales ledger account number. This made it easier for the book-keeper to match up the receipt to the outstanding invoice.

We then helped the client to identify which debts were really outstanding and cleaned up the accounting records so that the aged debtors listing was up to date and correct.

The next stage was to set up a procedure for collecting outstanding debts. A series of letters and telephone scripts was designed for the client, and his staff were trained in their use. Some telephone training was given so that the staff felt more comfortable chasing up the outstanding debts. The new procedures were carefully monitored by us over a three month period during which the average payment period was reduced from 64 days to 36 days.


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