A/R Invoice Collectibility By Age

The average collectibility for B2B invoice receivables by age can vary widely depending on industry, customer base, economic conditions, and credit practices. However, a general trend can be observed in how the likelihood of collection changes over time.

The time for outside, “third-party” collection agency action is when the debt may still be collectible, best from 90-120 days past due. Waiting too long is to invite a total write-off.

Here’s a typical breakdown by age of receivables:

0-30 Days Past Due:
- Collectibility: 95% to 97%
- Comments: Most recent invoices are usually collected without significant issues, as they are within standard payment terms.
31-60 Days Past Due:
- Collectibility: 80% to 90%
- Comments: These receivables might require follow-up reminders or slight collection efforts. The probability of collection remains high but begins to decrease.
61-90 Days Past Due:
- Collectibility: 60% to 75%
- Comments: At this stage, the collectibility decreases more noticeably. More aggressive collection actions might be required.
91-120 Days Past Due:
- Collectibility: 30% to 40%
- Comments: Receivables older than 90 days are increasingly difficult to collect. This often requires significant effort or third-party collection agencies.
121-180 Days Past Due:
- Collectibility: 40% to 50%
- Comments: The probability of collecting these receivables is low. Legal action or substantial incentives may be necessary to recover some of these debts.
181+ Days Past Due:
- Collectibility: Less than 50%
- Comments: Receivables in this category are often considered highly unlikely to be collected and might be written off as bad debts.
360+ Days Past Due:
1. Collectibility: Less than 70%
2. Comments: Receivables in this category are often considered highly unlikely to be collected and might be written off as bad debts.

These percentages can fluctuate based on specific business practices, customer relationships, and economic conditions. Maintaining good credit management and proactive collection efforts can help improve the collectibility of receivables.

From the practitioners at Leib Solutions LLC, a Smyyth company

June 19, 2023 Accounts Receivable, Collection Agency Tips, Collection Management, Credit Management Post a Comment

Collection Agency Should be Part of Your Collection Workflow

All businesses face cash flow issues during challenging economic climates, making it especially difficult to collect customer payments within the agreed-upon terms. To optimize your collection efforts and cash flow, it is essential to reevaluate the priorities of your collection department, including the utilization of third-party collection agencies. Making timely referrals to these agencies for bad debts can significantly improve collection results while minimizing unnecessary costs.

Is Using an Agency a Collection Failure or an Integral Part of the Process?

Needing a collection agency does not represent your department’s collection failure, as a certain percentage of all customers are destined to fall into this category regardless of how hard to try to collect.
When your collector staff exhausts their efforts without yielding results, there comes the point of diminishing returns. In such cases, a timely collection referral can be a victory for your company.
Holding onto past-due accounts for extended periods diverts your staff’s attention from high-priority customers and balances, which are more profitable. Continuously pursuing payment from those who consistently fail to pay is an unproductive use of resources.
By allowing collection agencies to handle difficult cases, your internal collectors can focus on where the cash comes from rather than being tied up with long overdue unpaid balances. The longer an account remains past due, the more challenging it becomes to collect. Collectability decreases each month to the extent that after nine months, the likelihood of collection may be close to zero.

Important! Your past-due customers will seek other suppliers and you will lose business if you do not collect. Consequently, integrating timely collection agency referrals into your collection process is essential.

Considerations for Collection Agency Placements:

Utilize your internal resources for accounts 10 to 90 days past due, as they contribute 95% of your cash flow and offer a high return on your time investment. Allow your staff to focus on the accounts receivable that keep your business running.
Waiting beyond 90 to 120 days and hoping for collection before referring the account to a collection agency is counterproductive. Timely interventions are more likely to succeed.
Assigning accounts to a collection agency immediately grabs customers’ attention as they realize that the unpaid debt could negatively affect their credit bureau scores.
Collection agencies charge fees based only on the cash recovered, and a reputable agency increases the chances of successful collection.
The agency can tailor their collection tactics, employing a customer service approach when you hope for future business and a more assertive approach for chronic late payers.

When is the Right Time to Refer a Debt for Collection?

Consider the following five factors before deciding to refer a customer to a collection agency:

The account is 90 days late.
The customer has failed to follow through, broken a promise to pay, or become difficult to reach.
The customer has indicated financial difficulties.
Remember that your customers prioritize their cash payments, and they pay those who have taken more aggressive actions or whose products they need. You have become a low priority and will lose future revenues if you do not collect.

What to Look for in a Collection Agency:

When selecting a collection agency, keep the following eight factors in mind:

Membership in a professional organization such as the International Association of Commercial Collectors (IACC) upholds a strict code of ethics and legal compliance.
Agencies specializing in either B2B or consumer collections. Collecting from businesses is more challenging and requires specialized expertise. If you have commercial debt, choose a commercial bad debt agency.
A well-established track record, having been in business for many years.
The ability to communicate with the agency’s management before initiating business and during the collection process.
An excellent history of collection results and adherence to market-standard contingency fees.
Strong reviews, such as positive feedback from clients on platforms like Google, indicate trustworthy and quality relationships.

April 17, 2023 Accounts Receivable, Collection Agency Tips, Collection Management, Credit Management Post a Comment

Machine Learning in Credit & Collection Scoring

Managing receivables is a crucial aspect of B2B financial management. Late or unpaid invoices and bad debts can significantly impact cash flow, causing businesses to struggle to meet their financial obligations. Companies rely on various tools, including payment and credit scoring, to prioritize their B2B collection activities to stay on top of outstanding payments.

Payment history is an essential tool for managing B2B collections. It provides insight into customer behavior and can be used to prioritize collection efforts and focus on accounts most at risk of defaulting. For example, if a customer consistently pays late, it may be necessary to send reminders or follow up more frequently than with a customer who always pays on time.

Machine Learning (ML) is a branch of artificial intelligence that involves developing algorithms and models that enable computers to learn from data and make predictions or decisions without being explicitly programmed. In accounts receivable, machine learning is used to automate and optimize the remittance application process, the collections process, deduction validation, matching debits to credit memos, and cash forecasting.

Advanced accounts receivable management software often uses Machine Learning (ML) to analyze a wide range of data points, such as a customer’s payment history, credit score, industry, and geographic location. By combining this information with external data sources, such as economic indicators and market trends, ML algorithms can better predict a customer’s payment behavior. In addition, ML can automate many of the time-consuming and repetitive tasks involved in the AR collection process, such as sending reminders to customers, flagging overdue invoices, and prioritizing collection efforts.

6 Reasons to Use Machine Learning in AR Software

Predicting Payment Behavior: ML algorithms can analyze historical data on customer payment behavior to identify patterns and predict when and how much a customer is likely to pay. This can help collections teams prioritize their efforts and focus on customers most likely to pay.
Identifying High-Risk Accounts: ML algorithms can analyze a variety of factors, such as payment history, credit scores, and other financial data, to identify accounts that are at high risk of becoming delinquent. This can help collections teams proactively address potential issues before they become more serious.
Customizing Collection Strategies: ML algorithms can also be used to analyze customer data and identify the most effective collection strategies for each individual customer. For example, some customers may respond better to phone calls, while others prefer email or text messages.
Automating Collections Processes: ML algorithms can automate routine collection tasks, such as sending reminders or following up with customers. This can help collections teams be more efficient and effective while reducing the risk of human error.
Collection Agencies: Determining when to place a past-due debtor account with a third-party collection agency to maximize the chances of recovery. The natural tendency is to delay an agency placement decision and avoid recognizing a loss. Paradoxically, the result of decision avoidance and waiting too long is the bad debt they were trying to avoid. Consequently, companies can benefit from automating placement through ML or even some simple system rules concerning what to do when a receivable reaches X age.
Cash Forecasting: ML can improve financial operations by providing more accurate cash flow forecasting. Traditional AR software solutions typically rely on static assumptions about customer behavior and payment patterns, which can lead to inaccurate cash flow projections. ML algorithms can analyze historical payment data and identify trends and patterns that are likely to continue in the future. This can allow businesses to make more accurate cash flow projections and better plan for future expenses and investments.

Machine learning is a powerful tool for accounts receivable software because it can help collections teams make more informed decisions.

Using Natural Language Processing (NLP) in Accounts Receivable (AR) Software

An enhanced way that ML can improve the AR collection process is by using natural language processing (NLP) technology. NLP technology analyzes unstructured text data, such as emails, PDFs, and remittance backups, to extract meaningful insights.

In this context, NLP technology can analyze customer communications to identify issues preventing them from paying their invoices. For example, NLP algorithms can identify common complaints or issues that customers may be experiencing with the products or services provided. By addressing these issues, businesses can improve customer satisfaction and reduce the likelihood of late or missed payments.

Additionally, NLP technology can automate customer communications, such as sending payment reminders and follow-up emails. By automating these communications, businesses can reduce the time and effort required to follow up with customers manually.

In Summary

In conclusion, machine learning has the potential to revolutionize the way businesses manage their accounts receivable processes. By analyzing large amounts of data and identifying patterns and trends, ML algorithms can provide valuable insights into customer behavior, improve collections, and provide more accurate cash flow projections. As businesses continue to rely on technology to streamline their operations, machine learning in AR software will likely become increasingly common. Machine learning can potentially revolutionize B2B accounts receivable processes, including collections, dispute and deduction management, and invoice collections.

November 24, 2022 Accounts Receivable, Collection Agency Tips, Collection Management, Credit Management Post a Comment

Commercial Vs Consumer Collection Agencies

If you are in business, there will come a time when you need to enlist the services of a collection agency to help recover your past-due receivables and bad debts. So how do you find the right one?

Commercial debt usually involves significant amounts and often complex circumstances that can lead to financial issues for your business. If the money owed is business debt, Leib Solutions is a highly-rated expert who handles business-to-business bad debt collection.

What is Commercial Bad Debt?

Commercial or business, bad debt is the result of a company (the debtor) that buys services or products on credit terms but fails to pay what is due to the seller (the creditor). As a result, the creditor must then act by suing the debtor or assigning the account to a collection agency to avoid a loss. In the worst scenario, if the creditor does not take quick action, the creditor has to write off the sale as a bad debt. Usually, the two businesses have a binding written agreement, such as a contract or a purchase order.

Corporate Form and Owner Liability

Typically, business debts are the responsibility of the debtor corporate entity and not the liability of the entity’s owners. The corporate (corp. or inc.) and limited liability company (LLC) forms of organization are intended to protect the owners from the business’s debts. Limited partnerships (LPs) also offer protection, although the “general partner” of the LP may be liable for the LPs liabilities. In Partnerships and Sole Proprietorships, the partners or owners are generally personally responsible, so many business people shy away from these forms of organization.

Collateral and Personal Guaranty

When a corporation’s or LLC’s credit is insufficient, a creditor may request a personal guaranty or cross-corporate guarantees from affiliated companies, in which case those parties are also liable. In cases of long-term credit, the creditor will request collateral, such as property or equipment. Having collateral or a personal guaranty is a powerful inducement to pay.

What is Consumer Debt?

Consumer Debt is money owed by a natural person or persons. Consumer debt collectors usually deal with only one person – the debtor – and the debts are usually quite simple, unlike business debts, which can be much more complex. The collection of consumer debt is a very highly regulated activity. See FDCPA Below.

The Fair Debt Collection Practices Act [FDCPA]

The Fair Debt Collection Practices Act protects consumers from unscrupulous collectors looking to use any means possible to collect the debt and penalize those beyond established ethical guidelines. In addition to the FDCPA, many states have enacted versions mirroring the FDCPA, and others go far beyond with even more protection for consumers.

The FDCPA does not regulate Commercial collection agencies. The debt is still commercial if the agreement with your business customer also includes a personal guarantee. A commercial collection agency would be the appropriate entity to place this account for collection since they have special expertise in dealing with businesses and handling these complex matters.

Collection Agency Credentials

While most State and Municipal laws require licensing of consumer collection agencies for each state in which they operate, many State licenses for commercial collection agencies are reciprocal throughout the United States.

Professional commercial collection agencies also follow the ethical guidelines of trade organizations, including the International Association of Commercial Collectors, Inc. (IACC). Membership in the IACC requires compliance with high standards of practice.

Choosing the Best Commercial Debt Collection Agency

When choosing a commercial debt collection agency, you will be concerned about how long they have been in business, their capacity to act quickly and expertly to collect your money, as well as how professionally they deal with debtors since the agency is a reflection of your company.

You also want to ensure your receivables are given the most professional attention. Using an agency that only handles commercial accounts, and understands the types of disputes that occur in business transactions, will ensure the best results. Commercial collection specialization delivers better results for you.

Unlike consumer collections, the best commercial collection agencies are not “dialing for dollar” call center operations. Instead, they employ business and negotiation experts familiar with your business.

Comments on Collection Agency Fees

Never choose a collection agency because of the lowest collection rates, just as you wouldn’t choose a doctor on that criteria. It’s the expected net results -the amount of money you get back – that are important. A professional agency should always do its best, but keep in mind that the fee percentage they keep is their incentive.

June 9, 2020 Accounts Receivable, Collection Management, Credit Management Post a Comment

Accounts Receivable Automation Tools, AI and RPA

Advanced technologies, including robotic process automation (RPA), will forever change accounts receivable, collections, and deduction management.

Like most other back-office functions, receivables management was a manual affair as recently as twenty or thirty years ago, working off printed agings, typing reconciliations and letters and mailing or faxing. It’s hard to believe that tools MS Excel, word processing, etc. as well as the internet and email (then called “electronic mail”) were not generally available until the1990s, even in the most rudimentary forms.

Improvement of the receivables management function will not only bring down administrative (personnel) costs but importantly to manage cash flow and protect the company’s profits. It has not received a lot of attention up to now because there is generally not a lot of staff involved. For many companies, accounts receivable represent “low hanging fruit” for improvement at this point.

Today, with robotics process automation and artificial intelligence, the job of managing credit, receivables, collections, and deduction management can be incorporated into a holistic, integrated setup that manages the process from customer onboarding to payment. System workflow manages the accounts receivable operation from beginning to pay.

AR is a transformative opportunity for a relatively small investment to drive performance in one of the largest asset classes. Managing inventory turns gets a lot of attention and management time, and it should. Receivables deserve no less attention.

Consider that a $1 Billion(revenues) company may have $125 million of receivables, of which $10 million may be over 90 days and at risk, and there may also be many millions of disputes and customer deductions on top of that.

AR automation also improves the customer experience, eliminating or streamlining trading partner paperwork and reconciliation or orders-shipments-payments. Large buyers (say Wal-Mart, for example) are mandating automation, as increasingly necessary in competitive pricing environments.

For the manufacturer, a tightly integrated billing to payment process will assure a healthy cash flow and an increase in profits due to the elimination of the “revenue leakage” that results from collecting less than you billed.

We are affiliated with the Smyyth companies. The Smyyth Carixa™ Cloud Platform is an example of the type of advanced solution that can transform accounts receivable operations. Automated credit applications, system controlled collection reminder emails with customer-friendly credit card and echeck payment options built right in, computerized communications, instant deduction reconciliation, to 100% automated cash application. Using robotic process automation, even accessing customer systems, is automatic, for documentation, reconciliation, cash forecasting, etc. The software replicates (and automates) our decades of experience and best industry practices to deliver an outstanding, friction-free customer experience.

The technology to optimize credit to cash billing to payment processes is here and will continue to improve using AI and RPA. More companies need to recognize how much more successful they could be by automating these backroom operations.

“Companies can add a few points to their profits with a laser focus on managing what is often their most significant asset -accounts receivable “

December 1, 2019 Accounts Receivable, Collection Management, Credit Management Post a Comment

Decision Gridlock Causes Bad Debts

Eliminate Collection Gridlock to Reduce Bad Debts

Frauds are rare. If you perform an easy credit check, you will have very few out-and-out scams, which we’ll define as businesses that order your products, knowing that they will never pay you. The odds of getting your money in these cases is nil.
Chronic Slow Pays. The many persistent slow payers require constant attention, so they do not age-out to the point you consider them bad debts.

If you allow customers to pay very slowly, they will order more product from your competitors rather than have to catch up. If ignored too long, they will become your “uncollectible” or “bad debt” losses.

Train Your Customers To Meet Your Expectations

Train chronic slow payers to avoid bad debts (and get future sales) by (1) starting your collection efforts at the due date, and (2) if not paid after 90 days of pursuit, assign the debt to a collection agency. While this collection schedule might seem aggressive to some, it is the only way to avoid the otherwise inevitable losses. Plus, if you outsource the problem accounts to an agency, you can focus on current, higher-value accounts receivable.

A reality check. Many collection departments allow small debtors, and sometimes big ones as well, to get quite old due to lack of staff or focus until they are months past due. On top of that, they often then sit in limbo for months more to avoid recognizing a bad debt or making a decision.

The Big (non) Secret to Reducing Bad Debts:

Don’t let accounts get so old before assigning them to a collection agency.

If you act quickly, you will collect your money more often than not. If you delay, you will more than likely write off 50-100%. The following two scenarios are constant frustrations to collection agencies, and for good reason:

A creditor holds back accounts until they are so old that they are uncollectible.
A creditor delays placement worrying about the collection fee instead of the amount that could be recovered, and they end up with a 100% loss instead.

Collectibility Decreases With Age

You already know this, but this chart is an excellent reminder to address slow pays more quickly.

Not every debt is collectible, but, on average, it is 200% more likely to be collected if assigned at 90 days vs. 360 days.

Avoid Collection Gridlock with a Collection Policy

The best way to avoid debt-placement gridlock and the resulting losses is to establish a written company collection policy, and stick to it. Here’s a simple example:

Collection action for accounts in the small account risk category will commence as follows:

10 Days past due: A collection email #1 when the account is 10 days past due.
20 Days Past Due. If the customer has not responded or made a promise to pay and followed through on it, a second call will be made, with email #2.
30 Days Past Due. This communication will advise the customer we need payment in 15 days or we will have to hold orders. This will be reinforced with email #3.
60 Days Past Due. The account is escalated to the manager, who will make a “final demand” before placement with a collection agency. Email #3.
75 Days Past Due. If no satisfactory resolution, Certified Letter #4 will be mailed,
90 Days Past Due. the account is placed with the collection agency.

Fast Quiz Conclusion

Is Scenario A or B more likely to avoid bad debt?

“This account is uncollectible. Let’s turn it over to a collection agency”.
“This account is aging and not paying. Let’s turn it over to a collection agency before it is uncollectible”

July 17, 2018 Accounts Receivable, Collection Management, Credit Management, News, Order-to-Cash Post a Comment

Leveraging Order-to-Cash For Shareholder Value

Improve Order-To-Cash to Increase Shareholder Value

The Order-To-Cash (O2C) process is an area that that remains largely untapped by many businesses. However, smart and effective management of the O2C process could help to improve business performance and the bottom line. It is no surprise that more and more corporations are beginning to prioritize this strategy for future business success.

Order-To-Cash is complex, thanks to the many cross-functional activities involved in the process. Activities include credit analysis and approval, order management, invoice, billing and collection, cash application and deduction and dispute resolution, as well as analysis and reporting. All of these activities will take place across the organization. However, many companies do not integrate and manage all of these activities as a single O2C process. Read More >

August 2, 2017 Accounts Receivable, Collection Management Post a Comment

17 Practices that Improve Cash Flow

Accounts receivable collection at many companies is still done the way it was in the green eyeshade era, leaving a great deal that can be done to improve results. Like many repetitive processes, collections is a “production” operation, and can be “re-engineered” to improve cash flow, reduce DSO and slash the disputes that result from letting unpaid accounts go stale.

Cash flow is the lifeblood of every business and success or failure depends largely on how this most important accounts receivable asset is managed. Collecting receivables more quickly enables companies to reduce bank borrowing, invest more in growth, and improve profits too.. Our experience is that the level of delinquencies can be dramatically reduced, cut in half or even better with some planning and effort. Here are some basic ideas to implement in your organization.

Credit and Collection Policy. Every company needs a credit and collection policy which gives the department the appropriate framework in which to work. This policy should be developed by management – detailing the criteria and the tools which will be used (restricting credit, collection agencies, lawyers, etc.). Establish standard policies and practices in your organization for yourself to handle. If you are a small company, even a one page credit and collection policy may be enough. Larger companies need to go into much more detail.
Advise the Customer of Your Policies. The customer should receive a written explanation of your credit and collection policies; that is, how you expect them to behave. Ideally, make it part of your Credit Application, but always email it afterward so they understand the rules of the game.
Credit Application. Use an automated credit application system which incorporates your policies and other agreements, utilizing e-signatures so you have an official signed agreement. This will save you countless hours that you can spend collecting.
E-signatures. If you need documents signed, check out the many electronic signature applications, and forget faxes. We use a service called DocuSign, but there are a number of such companies. It is extremely easy to use, and e-signatures are legally binding. This accelerates and simplifies getting any agreements signed.
Zero-Sum Result. Many companies wait until the customer is seriously past due before making the first Collection contact. This is a zero-sum game: if you do not collect what you are owed, the customer can use your money for free working capital, or more likely they pay another vendor who was more aggressive in their collection follow-up. Your customers will learn from your practices.
Good Customers Need Attention Toohem to, if they know you are on top of it. Many large companies use software to optimize their A/P Payments – they track how well you follow-up, and pay you accordingly. Small companies follow the same practice without the software – they pay you based on how you train them to pay you.
Letter templates and Call Scripts. How much do you want your staff to exercise their inner artiste? It depends on the experience of the individual, of course, but generally the answer is “little to zero”. Do not leave it up to staffers to come up with their individual communications standards. This includes collection letters, voice mail messages, and collection scripts. Standard templates meeting best practices should be developed, and used by all. Our advice is to skip written snail mail letters, except when you need to give official notice, certified mail, etc. Do not leave it up to individuals to make up their own policies and rules about how frequently the customer should be contacted for money and what the proper contact protocols should be. Most people do not like to ask for money; consequently, left to their own devices, they may not call with the consistency required to have effective collection function.
Systems and Workflow. If you have sizable receivables outstanding or many customers, or if you still use spreadsheets, you must acquire a workflow system to manage collections and automate the routine tasks. See Carixa for an idea of what a comprehensive, integrated “Software as a Service (SaaS)” system can do for you. You are virtually guaranteed faster collections, lower DSO, fewer delinquencies – as well as reduced overhead- if you deploy this powerful collection software. As with all SaaS offerings, it is internet browser based, so there is no software to install or hardware to purchase.
Contact Data. Your customer contact data should always include the email addresses of your payables contact, controller, and management. If the customer is a small company, you should also have the owner’s cell phone number. All of this information can be picked up on your credit application for new customers. Otherwise, it is a project.
Email vs letters? There is no contest – email is immediate, and less work, but just as with form letters, you need to use pre-formatted collection emails.
Make Paying Easy. Offer multiple ways to pay, including ACH and credit card with your smaller customers. Intuit QuickBooks, for example, has a very effective and free ACH offering for e-billing and a payment module that integrates with QuickBooks.
Train Your Staff. A bit of training and role playing can improve results dramatically. Get outside help if needed.
Collection Activity Cycle. Don’t wait as long as your competitors to make the first collection contact, and use email to your advantage. Get the money first.a. Early Intervention. If a large invoice will be coming due, it’s worthwhile to call in advance of the due date to solve any problems delaying payment. And, don’t be shy about sending “friendly reminders” at even 5 days.
b. If you did not receive a response to a call or email, follow-up every two-three days until you get a response.
c. If your customer is a smaller company, escalate a more serious collection matter by emailing or calling the customer management or business owner.
d. If a collection problem gets more serious (regardless of the size of your company) call your counterpart CEO to CEO, or CFO to CFO.
e. Track customer promises. Do not let them off the hook with unfulfilled promises. If the funds were not received the day they agreed to pay, call.
f. Expedite all communications. When sending invoice copies or other documents, scan and email them. Email eliminates the usual snail mail excuses, and you are assured that it’s reaching the intended party.
g. Use credit holds when an account is delinquent without a firm promise to pay.
h. If you are getting nowhere, assign the account to a collection agency, and refocus on those you can make progress with.
Prioritize Your Work. If you do not have all the experienced staff you need, or systems that will do it for you, prioritize your collection activity so you are working on the receivables which offer the greatest cash flow payback. If you have an advanced system, you can also employ risk or payment scoring to assign the accounts needing first attention. You may also consider outsourcing all or part of the function to a qualified agency, which usually produces more focused and better results, and usually at less expense than full time staff.
Assign Goals and Track Results by Department and Collector. Collections is a “production” job and you need to develop clear goals on cash and delinquency targets for the month, as well as number of daily calls and contacts (since you need to have all customers touched). Daily reporting should include calls made, promises obtained, disputes resolved, etc. Monthly reporting should roll up the daily results, plus report the financial results – Cash Collected, DSO, Delinquencies, etc. Of course, the department goals must match up against the corporate objectives from your CFO.
FDCPA Regulations. The Fair Debt Collections Practices Act doesn’t apply to B2B transactions, but always keep in mind that you must comply with the FDCPA if you are dealing with consumers. Regardless, all customers should always be handled in a professional and consistent manner which reflects your corporate culture, even the few abusive customers.
Collection Agencies and Outsource Services
Professional receivables organizations such as Leib Solutions offers both First-party and Third-party collection services. First- party is another name for day 1 outsourcing of all receivables under the client’s name. Generally, first-party is performed for a low service fee, often per invoice or a low percentage (even under 1% if your volume is high). Third-party is the traditional “collection agency” service when accounts get old, with fees commensurate with the age and size of collections.Uncollected invoices will eventually be written off as bad debts. It’s better that you assign them to a qualified collection agency while they are still collectible. It’s shocking how many companies wait until there is little hope of collection, telephone numbers disconnected, even bankruptcy, before calling a collection agency. This is evidence of a failed collection policy. The old saw “better to get 70% of something than 100% of nothing” applies here. It’s just common sense.

The first step in improving your company’s cash flow is to ‘take the first step’. Lay out a plan of attack or, if you want some advice, contact us. We will be happy to help in any way we can.

May 28, 2017 Accounts Receivable, Cash Application Post a Comment

100% Auto Cash Application

Most companies – even the very largest – are still getting by with auto-cash that still requires off-line manual work for resolution of exceptions, duplicate entry of chargebacks, and inaccurate postings that create extra work.

With the unmatched power of the Carixa Cash Application Engine, you can today achieve a 100% correct auto cash, and look like a genius in the process. We meld your Lockbox, ACH, and EDI files and apply our perfect-match algorithms to deliver a 100% automated result against your accounts receivable data.

And best of all, we manage it for you.

A few important features.

Multi-variable matching on any datapoint
Tolerances by category, dollar amount and percentages
Match against open and closed transactions
Automatic chargeback and deduction generation
Deductions automatically added to resolution workflow
Easy to use configuration can be managed by users
And – no IT resources needed to implement

April 28, 2017 A/R Reconciliation, Accounts Receivable, Cash Application Post a Comment

Bad Results From Arbitrary Application of Credits and Debits

Let’s say you have a large customer with a huge number of small-dollar unapplied credit memos, invoices, unapplied cash, debit memos, and deductions. For arguments sake, let’s suppose you can round up 1,200 credit memos totaling $625,000, and 1,600 deductions totaling $615,000, all un-matched for one reason or another. So you have a great idea to get rid of 2,800 accounts receivable items with one journal entry, and reduce the aging on this account by 56 pages, making the account a breeze for your collectors to manage.

What could go wrong?

First, and most obvious, is that the customer will deduct for many of the credits you are writing off and you will have to eat the loss because there is no offsetting credit entry, or if your audit trail is good (few are), you will have to unearth the credit and then do it correctly.
Secondly, the accounts payable post auditors may submit a double deduction two years later, and you will be stuck, unable to prove credit memo.
Thirdly, your accountants will have a problem with this practice, delaying your audit results if they find out.
Lastly, the highly remote application of Escheatment rules to unapplied credit memos and cash as “unclaimed property”.

Keep in mind, though, that it is your responsibility as well as proper accounting practice to correctly apply these transactions, and that is when good reconciliation technology is necessary, as the best systems, by using multiple matching criteria and powerful computing, can make short work of this problem. We at Leib have the service, enabled by our great Carixa technology, that is the solution to reconciliation problems of any scope or complexity.