Why Should You Chase Your Customers Before the Maturity Date of Your Invoices?

Article by:  Bertrand Mazuir

Any commercial relationship based on mutual commitments shared between the seller and the buyer. The buyer undertakes to pay the price of the service or equipment delivered on the date specified in the contract and invoices. However, he frequently has a high propensity to forget, at least temporarily, this commitment. Several reasons led him to this:

  • The business relationship established by nature a favorable balance of power to the buyer who takes advantage of it consciously or unconsciously.
  • Cash flow difficulties are pushing companies to delay payments to suppliers because it is the only credit that is free.
  • It is easier to get credit on suppliers debt rather than bank credit especially in the current banking environment (Basel 3).
  •  Non strict compliance with suppliers due dates does not imply the immediate consequences applied by the Bankers (bank charges, blocking lines of credit … etc.).

The purpose of a collection department is to counteract this reality and to reach a balance for the business relationship, so to get the customer to honor its commitment. The goal of collection is very simple: get the payment of invoices to their maturity date.

In order to have the best chance to achieve this goal, it is essential to take action before the maturity date of the bills, so make preventive recovery! Otherwise, achieving the objective would be based on chance, which is not satisfactory.

Moreover, this type of recovery has a number of significant advantages:

  • It allows you to start the relationship with the buyer on a soft and very customer-oriented base as the client is not overdue yet.
  • It promotes early identification of any dispute which would prevent the payment of the invoice. It may thus be treated and resolved quickly to maintain customer satisfaction and get paid quickly.
  • If all goes well, a promise to pay is given by the purchaser that will be recalled if he does not comply, initiating the recovery process in funnel.

How to do collection prior due date?

The recovery action takes place between -15 days to -5 days compared to the invoice due date. Since it is made in advance, the recovery is very customer satisfaction oriented.

The interlocutors are depending on the size of the company: accounts payable, general accounting, the purchase manager, the financial director or business manager.

The tone is friendly. The content mainly includes leading questions like: Is that all is well on the bills? Have you received the material? If yes, can you confirm the payment by the due date? Yes? By what payment mean?

The media used are mainly telephone and email. The choice between the two is determined by the type of account.

For example, if the account has two bills with a big amount, phone call follow-up is recommended. On the contrary, if it contains a hundred bills, it will be difficult to discuss each of them by phone. Email is preferred. Remember that email is the collection media that has the best response rate.
I hope I have convinced you of the value of preventive recovery as the first step of the collection process.

It has only advantages. The opponents of this type of action are often those who are afraid of upsetting or losing customers because of this recovery. This is completely unfounded since it is made by a person with a sense of customer relations.

Ready To Collect Your Money?