Here’s What Wikipedia Can’t Tell You About Collections
It seems people recognize that Wikipedia isn’t the most reliable resource for information (not like the ol’ “trusty”, 50 lb, Encyclopedia Britannica – don’t laugh, I have an entire set collecting dust on my bookshelf).
Unfortunately, credit professionals still use Wikipedia to determine mechanic’s lien/bond claim deadlines, the steps for filing UCCs and even for best practices on collecting past due receivables.
“Collection”: A Thoroughbred Racehorse?
I searched the term “collections” in Wikipedia and quickly found various results which included cash collection, artwork, abstract data, horses (including an “Irish bred, Hong Kong based Thoroughbred racehorse”) and various books/novels.
I narrowed my search and the results provided definitions for “past due”, “outstanding”, “overdue” invoices, and “see also: accounts receivable”.
The Wikipedia search of “accounts receivable” explains what accounts receivable is, what payment terms are and bookkeeping information.
It’s an endless click-trail of key terms. Shew! There is a lot of info, such as debt collection began in the summer of 3000 BC (really?!). Unfortunately, I’m not seeing the one thing I was here to find: a how-to for collections.
And Then It Hits Me, Like a Bookshelf Full of Encyclopedias
Wikipedia can tell me the “what”, meaning it can provide me general definitions and the origins of words/topics, but it can’t tell me “how”. Wikipedia can’t tell me how to collect past due receivables.
Wiki-Can’t-How. Fortunately, I work with B2B collections experts, so I don’t have to go far to learn more about HOW to manage the collection process and collect past due receivables.
Here’s Some “Hows”
- Monitor open invoices | Routinely review open invoices and as soon as an invoice is past due (e.g. If you bill on 30 day terms, day 31) contact your customer and inquire on the invoice.
- Try multiple mediums | Phone calls, emails, demand letters etc. & make sure you keep track of your communications – good record keeping is important!
- Pay attention to cues | Social cues & non-verbal cues are frequently early warning signs that an invoice (or customer) is going to be an issue. When people stop communicating they are sending a clear signal “I can’t/won’t pay the invoice, and maybe if I ignore you, you will go away”.
- Check status | Note changes with your customer’s business such as a disconnected phone number, undeliverable mail & email, and changes in their corporate status with the Secretary of State.
- Review credit | Credit reports can provide a wealth of information, especially for payment history, DBT changes, recent collection placements or judgments.
- Cut them off | If you have invoices that a customer isn’t paying, stop extending them additional credit. Debt is like a beast and if you continue to feed it, it will gobble up every last bit and give you nothing in return.
- Know when to let it go | And by “let it go” I don’t mean toss the invoice into the bad-debt-write-off-pile. “Let it go” from your desk and move it to the desk of a specialized collection agency. Collection agencies are trained and experienced, not to mention, a third party is sometimes more effective simply because they are a third party – removed from the situation.
- Don’t wait | Whatever steps you take, make sure you don’t let that receivable age for too long. It is a well-known fact, and long studied trend, that the longer an account remains past due the harder it becomes to collect.
Per the results from a survey hosted by the Commercial Law League of America “…the probability of full collection on a delinquent account drops dramatically with the length of delinquency… even after only three months, the probability of collecting a delinquent account drops to 68.6%. After six months, collectability drops to 52.1%. And after one year, the probability of ever collecting a delinquent account drops to 9.3%.”
What Did We Learn?
Wikipedia may tell you “what” a collection is, but it can’t tell you “how” to manage the collection of past due accounts. Need the “hows” of credit management, you should let NCS know! Million-dollar idea: we could change our name to NCS-opedia…