Debt Collection Policy – Service Organisations

  1. Customers will generally try to extend paying to a time they consider acceptable. Take every opportunity to emphasise with customers that the norm is 7 or at most 14 days and not 30 days.
  2. The debt collection process must be clinically efficient.
    1. Invoices should be attached to the final reports for the job. Daily timesheets ensure this is possible, and assist in isolating productivity problems (very useful in controlling write-offs).
    2. If clients are due payments, grants or refunds from third parties as a result of your work and they have accounts outstanding with you, call the client and ask them to collect their payment/grant/refund and pay their account at the same time.
  3. At month end:
    1. Review all 30 day accounts and consider whether any clients should be called to remind them about your collection terms. This is not abnormal where normal credit terms are 7 or 14 days. Also consider sending statements.
    2. Review all 45 day accounts and call clients to ensure payment will be made within 14 days. For clients who are under financial stress consider term payment arrangements. Ensure these arrangements are confirmed in writing and the payments will not be considered to be preferential payments in the case of bankruptcy or liquidation. On some occasions you may consider accepting a post dated cheque.
    3. Review all 60 day accounts and consider sending “60 day reminder letters” advising the client of normal credit terms.
    4. Review all 75 day accounts and consider sending “75 day reminder letters” advising the matter will be referred to your solicitor within 14 days.
  4. Consider the flow of your work in progress.  If you take 2 to 3 months to complete work, clients may consider they have the same time frame to pay their accounts.  If work is completed within 14 to 30 days, clients are more inclined to pay accounts within the same time frame.  This may involve delay in collection of work from the client, until it suits your workflow.
  5. Consider a number of alternative advanced arrangements, based upon estimated fees.  Ensure the arrangement has been agreed with the client and is in writing:
    • Payment of 50% on commencement of work and 50% on completion.
    • Payment of 25% at 1st July, 1st October, 1st January and 1st April.
    • Payment of standard monthly amounts via electronic funds transfer.

    Many small business clients would prefer to pay your account at regular intervals because it is less disruptive to their cashflow.  Advance payments take significant pressure off Work in Progress and monitoring debtors.

    The timeliness with which your accounts are paid is indicative of the client’s perceptions of your relationship with them.  Hence slow paying clients can in fact be a sign of trouble ahead and you may do well to consider revitalising or alternatively terminating the relationship.

    If you’d like to know more about how to speed up your cashflow,
    call the office on (03) 9585 7555 and ask for Noel or Amanda,