These days, more and more businesses are offering credit to their customers to boost sales. However, generously doling out credit can leave you with too many delinquent customers, which can put a strain on your business’s cash flow and daily operations. Though a collection agency can help you deal with customers who are far in arrears, a well-written credit policy should be in place before taking drastic measures.

5 Tips for Creating an Effective Collection Policy

1. Touch Base With Clients Regularly

Ideally, your collection policy should start right after a transaction. Ensure that accounts will not become delinquent by routinely following up with clients. Not only does doing so help with the collection, but it also creates a stronger business relationship. Customers who feel they are valued tend to be more up to date with paying their balances.   

2. Benchmark Against Peers

When drafting a collection policy, do your research first. Know how you compare against other industry players, and determine who your clients are; how long does it take for your customers to settle their accounts? From there, adjust credit terms and policies that work best for your business and clients.

3. Set a Clear Time Frame

Collection procedures must clearly state a schedule when your business will start getting in touch with overdue clients. For instance, you could send out the first letter to clients several days after the past due notice. If you don't receive payment in the said period, your business could start making calls more frequently as a reminder.  

4. Work With a Professional

If after a certain period has lapsed and the credit remains unpaid, it’s time to reach out to a collection agency for assistance. Refer overdue accounts to a third-party collection agency first before taking legal action; your client might be willing to settle on a new agreement instead of going to court.  

5. Assess & Adjust

Take the time to review your credit policies and procedures. Some of the guidelines may need to be updated, especially if there were changes to your business and processes. You may also find that some of the policy rules were ineffective for collecting. Consider making improvements with longer terms, shorter past due notices, or more aggressive outreach to delinquent clients.

Even if you have a well-drafted collection policy for your business, you may still have to deal with nonpaying clients. Headquartered in Twinsburg, OH, Joseph, Mann & Creed has emerged as a leading collection agency, serving states across the East Coast and Midwest. Their experts handle credit and legal collection and offer accounts receivable management. To request a quote, call (216) 831-5626 or visit their website. You can also follow them on LinkedIn for the latest news and information about their services.