Thursday, January 11th, 2018

Never Be Complacent About Collections

“The most important single ingredient in the formula of success is knowing how to get along with people.” – Theodore Roosevelt

When you don’t have a documented collection policy and procedures to facilitate collection of past due accounts, you are demotivating your people.

You might think that the team members don’t realize which clients are late on payment. Get real, they all know. If you ask them to work on assignments and they fully realize that this particular client is a “collection problem,” why would they be excited about doing the work efficiently and timely?

More importantly, why loan money to slow paying clients? That is what you are doing and your CPA firm is acting as a lender for the client.

Why does this happen so often inside CPA firms and other SME’s? It is because leaders are afraid that chasing payments might negatively impact the client relationship. Remember this, if you have a client who does not pay….. they are not a client. “I provide the service and you pay me.” – that is the basis for a client relationship.

Of course, there are times when certain clients might be struggling and delaying payment is an alternative. But, work out a payment plan, spread over several months so that they can eventually catch-up. The most important thing is communication with the client before they get too far behind.

Communicate your billing and collection policies upfront when you initially meet with a new client. When a client becomes “past due,” do not wait until they are 120 days past due to contact them. If you expect payment at 30 days and they have not paid, send them an email on day 31. Call them on day 40. Always send monthly accounts receivable statements. Designate a person to handle collections and make it their highest priority.

Communication is key. I have encountered partners who would actually dodge a phone call from a client if it was about collection!

Most progressive firms have a stop work policy. If a client is past due by 90 days (you decide on how many), all work stops until they make full payment or work out a payment plan and make the first payment. If they miss a payment, work stops.

I often get questions about 1040 clients who are slow to pay. If they are a collection problem this year, they are a COD client next year (they must pay before their work is released). If they are a continuing collection problem, they pay upfront before work begins.

I’m not talking about harassing clients, I am talking about embracing good business practices – collect what is owed to you and encourage your clients to do the same with their customers.

  • "You do not lead by hitting people over the head - that's assault, not leadership."
  • Dwight D. Eisenhower

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