How to

Take a
Winning
Approach
to A/R
Collections
 Table of Contents
Introduction............................................................................................................................. 1

Collections is More than an Accounts Receivable Problem................................................ 1

The Games Customers Play to Avoid Paying....................................................................... 2

Internal Communication is Critical to Success.................................................................... 3

You Need Software to Manage the Process and Keep Everyone on the Same Page......... 4

What a Great A/R Collections Approach Looks Like......................................................... 5

Industry Standards........................................................................................................... 6

Recommended Best Practices for Credit and Collections.................................................. 7

Best Practice Procedures for Collections............................................................................. 9

Collections before the due date....................................................................................... 9
Collections once the due date has passed........................................................................ 10

Use Software to Stay Calm, Cool, and Collected................................................................ 13

Communications via Notices and Letters............................................................................ 14

Sample Notices....................................................................................................................... 15
Email 5-7 days before due date....................................................................................... 16
Email on due date............................................................................................................ 17
First past due letter or email – 5 days after due date....................................................... 18
Second past due letter or email – 30 days after due date................................................ 19
Third past due letter or email – 60 days after due date................................................... 20
Final demand letter – 90+ days after due date................................................................ 21

Communications via Telephone Calls.................................................................................. 22

Sample Call Scripts............................................................................................................... 23

Courtesy call – 15 days after due date............................................................................ 23
Follow-up call – 45 days after due date.......................................................................... 24
Final call – 75 days after due date.................................................................................. 25

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Introduction
Collections is a stressful but necessary aspect of business. Collectors are stereotypically seen as pests – but
it doesn’t have to be that way. A well-designed and executed collections strategy aids your company by
reducing outstanding debt AND helping you retain business relationships.

We’re here to help you create that strategy.

Collections is More than an Accounts Receivable Problem

Overdue accounts receivable (A/R) affects the entire organization, not just the finance department. First,
A/R collections represent the last part of the sales process. Each collection call can either improve or spoil a
customer relationship, particularly if the customer feels the collection representative was too heavy-handed.
Inevitably, your A/R collections efforts will affect how customers view and interact with your sales reps;
establishing a positive, helpful approach to A/R collections will improve relationships and your ongoing
ability to win new business.

Tip – view accounts receivable follow-up actions

as a service benefit that helps customers remain in
good standing when it’s time to reorder.

Your sales team must ensure they qualify customers

and their ability to pay. Many receivables issues arise
because of structural sales problems. Sales teams may
be so eager to close deals to hit sales quotas or earn
bonuses that they close deals with loose credit terms
or financially shaky customers.

You may say, “This isn’t an A/R problem at all, then.

Let sales deal with it.” The finance department ensures
your company maintains a healthy cash flow, so the
ability for A/R to collect on receivables is the
difference between paying your creditors or potentially
shutting down the business.

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The Games Customers Play to Avoid Paying
Before we jump into how non-paying customers dodge your collections attempts, let’s assume that most
customers don’t pay their invoices due to honest mistakes. Such mistakes include:

• Misplacement of the invoice

• Failure by an approver to process the invoice
• Accidental omission of the invoice during the payment run
• Incorrect data entry into the customer’s payment system
• Delivery to an incorrect email address
• Missing information on an invoice, such as the due date and terms
(You can find more information here.)

Honest mistakes aside, you must view non-paying customers as organizations willing to use your money to
fund their business. This is a growing trend among larger companies that use smaller vendors as a source of
cash flow for operations. Following are the three most common games they play to avoid paying their
invoices and how to handle them:

They claim they forgot; They state, “I can’t do it” or They test your boundaries to
“Oh, that slipped my mind” “I give up.” These are terms determine what you’ll tolerate,
or “We forgot to enter that you never want to hear, as sometimes flat out saying
invoice into our payables they may signal a customer they refuse to pay or stating,
system.” is headed for bankruptcy. “You can’t make us pay.”

Solution Solution Solution

Be proactive and consistent. Don’t let it get that far. Monitor Deal with it head-on and be
Send reminder notices of your clients and look for consistent. Create your
upcoming due dates before warning signs. If their balance collections strategy and stick to
invoices are due. Notices at least grows uncharacteristically large it. If your strategy states that a
5 days before and on due dates or they suddenly switch to call is needed any time an
will make a difference. another payment method, your invoice is 15 days past due, make
client may be heading toward that call. Customers may pay just
trouble. Help them find ways to to avoid talking to you. If a client
meet their commitments. states they won’t pay, it may
mean they’re unhappy.
Determine the problem and
correct it. Finally, if no other
solution exists, take away their
purchasing privileges. If the
client still doesn’t honor their
commitments, legal action may
be needed.

You need to get to the bottom of the situation and help all customers be paying customers in a strategic,
organization-wide manner.
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Internal Communication is Critical to Success
Many organizations make the mistake of isolating collections from the sales
process, even though customers must often pay at least part of their invoices
before orders are shipped. Therefore, collections should be the final stage in the Document the knowledge
sales process. of experienced collectors

This means the collections department should be working with the sales team Some collectors have a wealth
of experience from years of
throughout the entire process. When this becomes the norm, sales teams
direct communication with
recognize the value of collections work.
customers. Document, consid-
er, and incorporate that knowl-
This applies beyond sales as well. Management, accounting, and even edge during strategy develop-
purchasing must be on the same page with collections to understand the ment. Doing so will help
company’s cash flow. But being ‘in the know’ and knowing what to do with collectors trust the new strate-
that knowledge are different things. gy, procedures, and system.

You need a company-defined strategy for how different departments will

communicate about collections efforts and measure results. If you want
collectors to perform at a high level, you need their buy-in. To get it, involve
collectors in the setting, implementing, and following of company collections
strategies and processes. Without buy-in, even the best strategy or software will
be challenging to implement and may not yield results.

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You Need Software to Manage the Process and Keep
Everyone on the Same Page
An effective collections strategy includes a lot of information, documents,
correspondence, and workflow processes – too much to manage manually, Characteristics of A/R &
and ERP systems don’t have A/R management functionality robust enough CM software
to optimize collections. Accounts receivable (A/R) and collections
management software (CM) answers the question, “Where is my money?” • Universal collections
by tracking and responding to the A/R information that could otherwise fall strategies with custom
through the cracks. “Is ABC company paying on time? If not, when did they options
say they would pay? Did they pay when they said they would?” Etc.
• Email automation

Modern A/R & CM software integrates seamlessly with a company’s existing • Option to attach invoices or
ERP system allowing you to create a collections process. The software statements to emails
consolidates the A/R data and automates the workflows, enabling you to • Reminder and collection
streamline collections activities. letter templates
• Detailed task list and
A/R & CM software provides transparency between sales, credit, and
calendar
collections. Well-designed software saves on staff training, reduces labor
resources, and provides electronic tracking that removes non-paying • Audit trail for the collections
customers’ ability to make common excuses since everyone involved in process
the process can check the status of accounts, invoices, and related
collections communications.

Sophisticated A/R & CM software packages provide a full audit trail for
activities and other helpful features, including:

• Real-time collections activity tracking

• Custom aging brackets (to group customers based on past due invoice age)
• Single-screen dashboard views of performance and productivity
• Customizable views of action(s) status
• Performance tracking
• On-demand call list development

A complete view of your

A/R collections health.

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What a Great A/R Collections Approach Looks Like
A strong approach to A/R collections has well-established characteristics in three core areas:

1. Standards
2. Best practices
3. Procedures

You should establish standards and practices simultaneously, with procedures to reflect them. Let’s delve
into those so your organization can frame an approach to A/R collections.

By following industry standards and practices before establishing procedures that reflect them, you can
ensure your organization gets paid faster, doesn’t miss details, minimizes angst among customers and
employees, and maximizes revenue.

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Industry Standards

There are standards to measure against and industry benchmarks you

want to meet or beat. The measures to track are as follows, and you can
learn the benchmarks for each measure from your industry association
or trade group.

DSO – days sales outstanding

DSO formula: current receivables x number of days in analyzed period
/ credit sales for the period analyzed

Bad debt
Actual bad debt compared to industry local credit groups and/or industry
benchmarks forecasted bad debt versus actual bad debt

Current A/R vs. past due A/R Percentage

The total dollar amount past due, divided by the amount of total AR.

Collection effectiveness index

Formula: beg rec + (credit sales / N*) – end total / rec beg rec + (credit sales / N*) – end current rec x 100.
In this formula, *N = number of months or days, *beginning receivables
Measure 1) collection performance versus collection forecast 2) collection performance by collector

Risk Exposure - Factors to consider

• Bankruptcy
• Cyclical review
• Profit margins
• Management tolerance for bad debt

You can find additional information on standards and benchmarks from NACM here.
In general, you’ll find:
• 26% of invoices 3 months old are uncollectable
• 70% of invoices 6 months old are uncollectable
• 90% of invoices 12 months old are uncollectable

So, having standards, policies, and procedures to keep A/R collected within 90 days is worth the investment
of time and resources.

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Recommended Best Practices for Credit and Collections
Your customers are your business portfolio, and portfolios bring credit risk. We’ve all had customers
with a history of paying late. The key to keeping a healthy cash flow and low DSO is to isolate the late
payers and have different credit limits and collections strategies applied to their accounts to reduce risk.
Carefully monitor payment trends with aging reports and implement a credit rating system to reduce
overall credit risk. Best practices to ensure better cash flow and lower DSO include:

1. Review customer credit ratings

The most common way to track credit worthiness is by
pulling customers’ credit ratings from a credit-
monitoring firm; popular firms include NACM,
Dun and Bradstreet, Experian, and Equifax.
These firms allow you to check credit on an
individual business, a subset of, or your entire
customer portfolio. If you want your
customers’ credit ratings updated on demand
and available immediately for credit
worthiness decisions, select a credit-
monitoring firm that integrates with your
accounts receivable or collections software
system. One of the oldest and largest credit-
monitoring firms is NACM National Trade
Credit Report. Their report offers an on-demand predictive
score and risk rating through your accounts receivable or collections
software. An accurate picture of how a customer pays is necessary to make
credit and credit-limit decisions to reduce credit risk and increase your chances of payment.

2. Review your GL accounts

Commonly forgotten general ledger accounts aging accounts, aka allowance for doubtful accounts,
bad debt accrual, and bad debts expense. The projected estimates for these accounts could come from
industry averages, history, trends, or just be pulled out of the air. Companies use a myriad of reasons
and numbers to support these projected estimates; they also plan to decrease uncollected accounts
receivable.

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3. Set goals for uncollected A/R
Use the aging method to estimate uncollected accounts receivable. The aging method takes the projected
sales by month and decreases revenue by the percentage of uncollectable sales. You could use an aging
schedule like the one below or one specific to your industry. This method allows you to see the percentage
and dollar amount of revenue you won’t receive based on the number of invoice-past-due days.

The chart below shows the number of months the invoice is overdue, the amount due, the percentage
estimated to be uncollected, and the projected uncollectable amount.

Percentage estimated to be uncollected according to The Accounting Minute by Sutherland.

Both finance and sales departments need estimated bad debt information and should understand how the
estimated bad debt was projected. The fun part is trying to beat the estimate and collecting more revenue for
your company.

4. Rate your customers

Rating your customers (and updating the rating regularly) allows you to approve credit and monitor
balances to avoid credit problems from the beginning.

You might want to think about customer ratings as types of cars, that align with various credit ratings (we
did a full blog post on it here). In simple terms, you want to rate your clients as:

• A or prime: Almost always prompt; may require less monitoring but should depend upon company
size and/or balance owed
• B or good: Usually prompt, collections can also be minimal
• C or limited: Requires regular monitoring of balance, credit line, and past dues
• D or marginal: High-maintenance accounts, requires constant scrutiny, limited terms

• E or COD only: No terms or pre-paid only as determined by credit

You can find more information on metrics you should be tracking here. 8
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Best Practice Procedures for Collections
There are various effective policies and procedures for handling past due invoices. The following provides a
detailed timeline that could be modified and implemented in your collections strategy. The suggestions
discussed below are guidelines for designing the strategy for your business.

Collections before the due date

Collections is the last step in the sales cycle. You can reduce bad debt and past due accounts by increasing
the debts collected before the due date and ensuring your clients’ flow of goods and services isn’t
interrupted. Start collections before the due date as a customer service offering by following these simple
tips:

1. Send invoices promptly.

Send invoices daily or as soon as the customer receives the product or service. Adhering to an invoicing
processing schedule, like a specific day of the week, may add 3-5 days to the collections cycle.

2. Prominently feature terms and due dates on the invoice document.

Leave no room for misunderstanding by clearly spelling out the terms in bold letters. If a customer
consistently pays late by the same number of days, speak to their accounts payable department to go over
the terms on your vendor account and correct them as needed.

3. Encourage customers to accept invoices electronically.

EDI or emailed invoices will reduce cost by eliminating postage and
can reduce processing time for you and your customer.

4. Offer several payment options.

Offer several payment options so your customers can handle their
own cash flow while still paying your company what they owe.

5. Deliver invoices to the right contact.

Make sure your invoices are going to the right person at the right location to avoid delays in processing.

6. Become familiar with clients’ approval processes.

This information can help you determine where your invoices are in the payment process, and help you
change your delivery method or destination to improve processing speed.

7. Send a reminder email 5-7 days before the due date:

Send a friendly email reminding the customer that the due date is approaching. This may be the difference
between an on-time payment and a two-weeks-late payment.
• Attach a copy of the invoice
• Provide a contact person for the client for discrepancies/disputes
• Advise the client of the accepted payment methods
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Collections once the due date has passed

When an invoice’s due date has passed, you must execute your collections strategy. To be effective,
implement a credit and collections software application like Collect-IT. Collect-IT helps your credit
department start the collections process earlier, decreasing days sales outstanding and improving cash flow
by creating and deploying an automated collections strategy.

Ideally, you want an established delinquency schedule with the associated letters and planned phone calls.
For most organizations, these letters and calls will occur at net 30, net 60, net 90, and net 120 days past the
original due date. Establishing these milestones will provide triggers to communicate with your clients.

Having a defined system for communication with your clients helps collectors minimize bad debt. Below is
a suggested set of steps and timeline for invoices. Sample letters and call prompts are provided in the next
section.

On the due date:

• Email a reminder
• Attach a copy of the invoice
• Provide a contact person for discrepancies/disputes
• Advise the client of accepted payment methods

0-5 days past due:

• Call to check on payment status, invoice sent to correct
contact person, resolve any discrepancies/disputes Tip: All written communication
• Offer a payment plan 5 days past due - initial delinquency: sent throughout the collections
• Email the first past due letter process – emails and regular
postage – should include copies
of the invoice(s) in question.
15 days past due:
• Courtesy call to confirm receipt of invoice and product
• Identify existing discrepancies or disputes and resolve ASAP (e.g., incorrect terms, credit balance, POD
required, copy of invoice required, and/or wrong contact person)

30 days past due:

• Email second past due letter, including the customer statement or aging report
• Two days later, follow up with a call to confirm receipt of statement and invoices and attend to any
unresolved disputes or discrepancies
• Secure payment commitment – promise to pay – and request specific payment details (Obtaining a
promise to pay enables you to chase a broken promise to pay)

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60 days past due:
• Email the third past due letter
• Consider a credit hold and notify the client in writing
• Follow up with a phone call
• Consider modifying credit terms, prepayment, deposits, or COD
• Email and fax the customer (owner, president, controller) requiring full and final payment within 10
business days either by certified funds or wire transfer, sending a copy of correspondence to internal sales
management

Tip: Follow through and keep your word. If your strategy calls for a client to be placed on credit
hold after 60 days, do so. If you sent a letter stating that you’ll send a client to a collections
agency after a specific date, send them. Not following through will only cause your client to not
take you seriously.

75-90 days past due:

• Make one last call to the customer with an urgent request for a same-day reply
• Consider modifying credit terms

90+ days past due – final demand:

• Send a formal letter (a 5 or 10-day demand) via the postal service and copy the guarantor, if any. Send
the letter certified and/or with a receipt requested.
• Notify sales and management of account status
• Contact customer within 2 days of receiving delivery confirmation of the letter to establish that the final
demand letter was received
• Prepare customer file for collections, including:
o Notes of discussions with the customer
o All correspondence sent to the customer regarding invoices in question
o Copies of proofs of delivery on invoices in question
o Original credit file: the signed credit application, personal guaranty, UCC filing, etc.
• Consider taking last-ditch efforts to collect: turn over to collections agency, sue, or terminate credit terms

Tip: If you pass an account to a collections agency,

every contact attempted or made must be documented
and proof provided in court. An email is the best
documentation/proof; however, when you make calls,
make a date- and time-stamped note on the customer’s
account about who you spoke to, what you discussed,
and the decisions or promises made.

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 Cheat Sheet for Collections Timing Best Practices

5-7 days before due date – Friendly email reminding of the due date
Due date – Second email reminder
5 days past due – Email first past due letter
15 days past due – Courtesy call
30 days past due – Email second past due letter
45 days past due – Follow-up call to check on payment status
60 days past due – Email third past due letter
75 days past due – Final call to client requesting resolution
90+ days past due – Send final demand letter via postal service

Be mindful that you’ll have more than one category of clientele and must design different strategies to
correspond with each category. For example:

• You may follow the timeline above for a medium-sized client that does a standard amount of business
with you, which we’ll call a “B” client.
• A “C’” client could do business with you infrequently, in small quantities, or be new. With a “C” client,
you may shorten the time to the final demand to 60 days past due.
• You may have an “A” client who does business with you often and/or in large quantities. Based on their
history, you may extend the final demand to 120 days past due.

Regardless of how you design your strategies, it’s critical to explicitly define them and have your team
follow through to the end of the process.

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Use Software to Stay Calm, Cool, and Collected
A lot goes into your standards, policies, and procedures - far too much for people to perform and track
manually.

Accounts receivable software and account receivable software are vital for handling A/R transactions,
tracking past due accounts, improving communication with customers, and easing the burden on employees.

Collect-IT allows you to:

• Create and deploy an automated collections strategy.
• Start the collections process earlier to decrease DSO and improve cash flow.
• Automate mundane and labor-intensive A/R management tasks
o emailing customers,
o scheduling phone calls
o creating collections letters
• Implement a collections strategy uniformly across all customers in a given ranking
• Implement personalized strategies for specific customers

Automating your receivables workflows can solve many collections issues.

Better yet, you can customize and automate communication with customers. Need to send a reminder email?
Automate it. Want an updated task calendar for your collections staff? Automate it.

Want a cold drink after work? For that, you’re on your own. But for the other things, Collect-IT works like a
charm.

Better yet, you can customize and automate communication with customers. Need to send a reminder email?
Automate it. Want an updated task calendar for your collections staff? Automate it.

By automating your accounts receivable process via A/R software, you can maximize the number of
accounts that maintain a positive status and minimize the time you spend on collections activities.

With accounts receivable and collections management software, you and your team know nothing was
overlooked. Collect-IT can incorporate industry benchmarks, metrics, and other critical data for making
credit decisions and integrates with NACM so you can view trade credit reports directly in the software.

Let Collect-IT be the tool that alleviates some of the stress from your collections efforts.

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 Sample Notices
and Call Scripts

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Communications via Notices and Letters

Timing of communications
Consistent communication with your clients will often be the difference between getting an overdue
invoice paid or having that amount become bad debt. Communication can be a call, email, or formal
letter, and these methods will do the job when appropriately worded and sent at the right time.

Benefits of using a letter template

Letter templates are a vital aspect of the automated collections strategy. With one simple action, you
can populate a form letter with the details for a client and transaction, saving your company time and
increasing productivity by freeing up your employees to perform more essential job duties.

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Email 5-7 days before due date

This is a client service offering and a courtesy to your client. Occasionally, invoices get lost in the mail or
get deleted accidentally from an email inbox. This is an excellent service to help your clients remain in good
standing and should have a friendly but professional tone.

Dear <Name>,

We hope all items were received and you’re happy with your purchase. This is a friendly
reminder that the due date for invoice number <Invoice_Num>, <Due_Date>, is just around the
corner. The amount still due on this invoice is $<Invoice_Total>. A copy of the invoice is
included with this communication.

If you’ve already sent payment, we thank you very much. If not, we accept payment via check,
ACH, wire transfer, or credit card.

If there are problems with the invoice or with the service or product you received, please contact
<AR_Rep_Name> at <AR_Rep_Email> or <AR_Rep_Phone>. They will work with you to
resolve any issues.

Thank you for being a valued customer. We look forward to our continued business relationship.

Sincerely,
<Signature>

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Email on due date

This is another client service offering to your customer. This communication keeps your invoice in the
client’s mind and may prompt payment or at least an acknowledgment.

Dear <Name>,

We’d like to remind you that the total amount of $<Invoice_Total> for invoice number
<Invoice_Num> is due today, <Due_Date>. A copy of the invoice is included with this
communication.

If you’ve already sent payment, we thank you very much. If not, we accept payment via check,
ACH, wire transfer, or credit card. Please contact <AR_Rep_Name> at <AR_Rep_Email> or
<AR_Rep_Phone> to provide us with the payment information so we may properly notate your
account. If any issues prevent this payment, please contact us. We’d like to work with you to
resolve any problems.

Thank you for being a valued customer. We appreciate your time and attention.

Sincerely,
<Signature>

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First past due letter or email – 5 days after due date

When an invoice payment falls behind, it could be that the customer simply forgot to pay. If you’re
following the strategy we’ve outlined, you’ve sent two reminders with the invoice attached before the due
date, in addition to the original invoice. However, this invoice is still barely past due. In the first letter,
remind the client, again, in a friendly but professional way, that payment is due.

Dear <Name>,

Just a reminder that invoice number <Invoice_Num>, which was issued on <Invoice_Date> for
$<Invoice_Total>, is now past due. A copy of that invoice is included with this communication.

If payment has been issued, please contact <AR_Rep_Name> at <AR_Rep_Email> or

<AR_Rep_Phone> to provide us with the payment information so we may properly notate your
account. If payment has not yet been made, we accept check, credit card, ACH, and wire transfer,
and encourage you to make a payment today using one or more of those methods.

As always, we appreciate you as a valued customer and look forward to our continued
relationship.

Sincerely,
<Signature>

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Second past due letter or email – 30 days after due date

At the 30-day overdue mark, it’s acceptable to make the wording of your letter more forceful. However,
always remain professional.

Dear <Name>,

We value your business but are concerned about the status of your account.
According to our records, invoice number <Invoice_Num>, issued on <Invoice_Date> for
$<Invoice_Total>, is now past due. A copy of that invoice, which was due on <Due_Date>, is
included with this communication.

We’ve contacted you several times to settle this but have not seen payment.

We accept payment via check, credit card, ACH, or wire transfer. Please contact
<AR_Rep_Name> at <AR_Rep_Email> or <AR_Rep_Phone> to update your account on the
status of your payment. If there’s a problem with this invoice, please contact us. Our department
is here to help keep your account current so we may continue to extend credit to you.

Sincerely,
<Signature>

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Third past due letter or email – 60 days after due date

At the 60-day mark, a more strongly worded letter is necessary; this is your last formal written
communication before the demand better. Be specific by including the actions you plan to take if payment is
not received – but remember, you have two goals: to collect the debt and keep your customer.

Dear <Name>,

We’ve repeatedly communicated with you about the status of your account. Invoice number
<Invoice_Num> for $<Invoice_Total>, dated <Invoice_Date>, is now significantly past due.

Your immediate attention to this matter is required.

We value your business, but per our company’s credit policy, we will be forced to place you on credit hold
if payment is not made within 5 days of this letter. If you’re unwilling or unable to pay the amount due
within the next 30 days, we are forced to report this debt and begin a formal collections process.

Please contact <AR_Rep_Name> immediately to return your account to good standing by making a
payment today. They can be reached at <AR_Rep_Phone> or <AR_Rep_Email>. We accept check, credit
card, ACH, and wire transfer and can accept your payment using multiple methods.

Businesses sometimes face unexpected challenges. If payment in full today is not possible, we will work
with you to formulate a satisfactory payment plan.

Please give this matter the attention it deserves and contact us today.

Sincerely,
<Signature>

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Final demand letter – 90+ days after due date

At 90 days, you’ll send your final notice. Again, specifically tell your client what actions you’ll take. We
recommend sending this final letter via the postal service and, preferably, certified mail. You may also send
a copy by email. Sending it certified provides proof of delivery, which you’ll need if the account goes to a
collections agency. Even now, you’re still trying to collect a debt and keep the customer – your letter should
reflect that.

Dear <Name>,

The status of your account has now become critical. YOUR ATTENTION IS REQUIRED.

Invoice number <Invoice_Num> for $<Invoice_Total>, dated <Invoice_Date>, is now significantly past
due. We have communicated multiple times regarding this matter and, despite our numerous attempts to
resolve it, have not yet received payment. Included in this communication is a copy of that invoice.

Unless payment in full is received or satisfactory payment arrangements are made by <Final_Date>, we
will have no other option but to refer your account to our collections agency. This is not a step we will
enjoy taking, as it was our goal to build a long-standing business relationship when we extended credit to
your company.

Please contact <AR_Rep_Name> immediately to return your account to good standing by making a
payment today. You can reach them at <AR_Rep_Phone> or <AR_Rep_Email>. We accept check, credit
card, ACH, and wire transfer and can accept your payment using multiple methods. If payment in full is
not possible today, we will work with you to create a payment plan.

This is our final request for cooperation. Please govern yourself accordingly.
Sincerely,
<Signature>

Tip – if a payment plan must be worked out, a change in credit policies may be offered for future
orders; for example, pay in advance or COD. This might allow you to keep the customer while
collecting on this delinquent invoice. This is also the time to move the customer down one or two
customer rankings (A, B, or C) and use those credit policies with this client; they may move back
up in rankings after the payment concern is resolved.

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Communications via Telephone Calls

Courteous calls
Your purpose is to collect a debt and retain a customer for
future business. The way you handle communications
will be the difference between whether the client pays
and, if they pay, whether they’ll continue to purchase
your products and services. When speaking with
your client, maintain a calm, courteous, and
professional demeanor. They may become angry
or belligerent, but if you remain professional
throughout the conversation, you may find that
the tension can be relieved.

Remember that your client might be going

through a tough financial moment. Give them the
courtesy of listening to their situation; when you
understand the issue, you can offer a solution that
works for both them and you.

Before you pick up the phone

Collections calls are difficult, but preparing can make them easier.

• Be familiar with the details of the past due invoice and have a copy to refer to. Also, investigate the
client’s order, payment history, and other open invoices.

• Make a list of possible excuses and prepare your rebuttals. Practice out loud, if that helps. For example,
the client might say they never received the invoice. You can answer, “I can get it to you right now. It was
previously mailed/emailed to <address>. Is that correct?”

• Dial the phone with a good attitude. You’re calling to collect a debt and help your client remain in good
standing. Be respectful of your client and their situation.

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Sample Call Scripts
Be prepared to take notes when making a collections call so you can update your files later. Note who you
spoke to, their role in the company, the reason and details they may provide for the lack of payment, and any
agreements and/or promises made.

Courtesy call – 15 days after due date

Depending on the client’s rank, you may need to modify the call. For example, you might not want to push
for same-day payment if the call is to an A client.

Hello, this is [your name] with [your company name]. To whom am I speaking?

{Client answers}

Hi, [client’s name]. I’m calling to follow up on [invoice #__________] for [$ __________],
which seems to be [XX] days past due. I wanted to ensure there isn’t a problem with the
invoice and, if everything’s in order, find out when payment will be made.

1 {Client answers there is a problem}

Well, I’m sure I can get you to the right person to take care of the problem, if it’s not me.
What’s the issue?

{Client replies with details. Depending on the situation, solve it immediately or refer to the
person who can}

OR

2 {Client answers there is no problem and that the check will be sent that day}
Thank you. I’ll look for the check in the mail over the next few days. Our terms are net [XX],
and we try to keep our customers’ accounts in good standing so they can take advantage of the
credit we’ve extended. We also accept payment via credit card, ACH, or wire transfer. Would
you like me to send you instructions for another method?

OR

3 {Client answers with no problem, but the payment is scheduled for later or not at all}
I’m sorry to hear that. Our terms are net [XX], and this invoice is now [XX] days old. Is there a
way to expedite this payment and get it in the mail today? We also accept payment via credit
card, ACH, or wire transfer. Would you like me to send you instructions for another method?

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Follow-up call – 45 days after due date
More than likely, this will be a “broken promise” call. You were probably told during the last call that a
payment would be forthcoming. If you’re making this call, the promised payment never arrived.

Hello, [client’s name]. This is [your name] with [your company name]. I’m calling regarding
[invoice #__________] for [$ __________ ]. We last spoke on [date], when you stated a
payment would be made on [date]. Unfortunately, we haven’t received that payment.

{Client answers that the check is in the mail}

Great! Could you tell me the check number and the date it was mailed?

{Client states the date is greater than 5 days previous}

That should have reached us by now. I wonder if there’s a problem on our end. Can I confirm
the address you mailed it to?

{Inform client you will investigate and call back to issue a stop payment and recut the check
if not found. Request a faxed copy of the new check}

OR

{Client answers they could not send the check}

We must resolve this today. We accept credit cards, ACHs, and wire transfers, and I can split
the payment between different methods. If paying the entire balance today isn’t possible,
would you be interested in a payment plan? I want to help you make your account current and
avoid any further collections.

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Final call – 75 days after due date
You’ve done everything you can to resolve this overdue invoice. Emails, letters, calls – all done politely and
professionally – but you still haven’t received payment. Prepare meticulously for this final call.

Hello, [client’s name]. This is [your name] with [your company name]. I’m calling again
regarding [invoice #__________] for [$ __________]. This account is now significantly past
due. I hope we can resolve this account today because otherwise we must refer you to a third
party, which can negatively affect your credit rating. Let’s work together to avoid that.

If a payment plan is established during this call, secure a partial payment before ending the
call.

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