Managing Overdue Customer Accounts
Managing Overdue Customer Accounts
ACCOUNTS
BY TEREFE KASSA
There are three recommended ways to gather data, and there is one
common trap that usually provides deceptively shallow data. First, the
three robust methods for collecting information:
2. Interpreting Data
After the interviews it is usually necessary to translate the vague
statements of the customers into a useful list of needs.
So how, exactly, does one transform what the customer says into something
you can work with? Here is a useful process with several helpful
constraints and suggestions for expressing the data.
Write the needs in terms of what the product has to do, not how it
might do it.
Express the needs as specifically as the raw data
Use positive phrasing
Express the needs as an attribute of the product
Avoid the words must and should
3. Organizing Needs
After interpreting the data, organize them. Group similar needs together,
prioritize them, etc. Decide what is truly important to the customer. Define
the “critical needs,” those needs which absolutely must be met before the
product can be considered successful.
1. Product needs
Product requirements are associated with and around the product. If your product matches
your customer needs they become your potential buyers and vice-versa. The main
attributes of product needs can be:
Price – Customers generally set their budgets for any product purchase.
Features – Customers look for features that would solve their problem and reliability in
functioning while using the product.
Effectiveness – The product should be effective in streamlining the process to save time.
Oracle reports and Discoverer queries may be used to identify which awards require follow-up
activity. However, the RF Past Due Invoice Report is the recommended tool for identifying
outstanding invoices that require follow-up with a sponsor. This report should be run at least
monthly or more frequently, if possible. The report includes the customer (sponsor) name, award
number, invoice amount, current balance due, as well as the following information:
AR Invoice Number – 6-digit unique number assigned in the AR module to an invoice that is
approved and released, or the invoice number that is assigned
to an advance invoice created in the AR module.
Invoice Date – Date the invoice was released in the Grants Management module, or the date
the advance invoice was created in the AR module.
Note: This field can be changed by the user when releasing the invoice.
Days Past Due – The system-calculated number of days that the payment is past due at the
time that the report is run. As defined above, the payment
due date is based on the billing terms of the award and the invoice date.
Initial call – Verify that sponsor received invoice. If invoice has been received, determine
when payment is expected. If invoice has not been received,
verify that sponsor name and address are correct. If address is not correct, make the
appropriate changes in the RF Oracle business application and resend invoice.
Follow-up calls – Determine reason(s) for nonpayment of invoice and appropriate follow-up
action. Follow-up calls may require numerous attempts to
make contact via leaving messages or aggressive calling in order to make direct contact
with a person.
Follow-up Letters – Send sponsor either a campus-specific letter or one of the RF Past Due
Invoice Letter.
It is best practice to use a combination of regular follow-up calls and written follow-up
(letters or e-mail.)
Overdue payments could be a daunting endeavor for business owners due to factors that
often need utmost attention. The following are effective strategies to pay down overdue
payables.
This strategy can improve your invoice management. Reports of ageing accounts payables give your
company the ability to forecast payments. You can utilise your invoice payments history to predict
when and how much you'll need to pay for specific accounts instead of waiting for invoices.
It's crucial for you to monitor all activities related to expense management, including all cash
outflows and due payments. Tracking every payment due allows you to avoid late or double
payments.
Communicate openly with your suppliers about your capacity to pay past due bills when things get
too tight. Re-negotiating terms to loosen up the payable crunch is a great way to relieve pressure
from your finances.
4. Set up reminders
While you may feel you can stay on top of payments and invoices without assistance, that's
not always the case. Running a business involves multiple functions and employees, which
is challenging for one person. You can easily handle payables and act towards improving
Late payments may indicate inefficient processes in your AP management. You should take
the time to analyse your processes, identify the cause of delay and optimise your AP
Automating your accounts payable process can improve speed, accuracy, and quality. Eliminating
manual processing will help you prevent losing invoices, making double or late payments, and a
negative cash flow.
Here are four simple steps to follow in order to meet customer needs successfully.
Identify – Follow customer needs analysis via surveys, interviews, focus groups, or social
listening.
Distribute – Once identified the needs, you can distribute it across the right teams and
departments.
Create – Tailor product features, create detailed content that speaks about customer needs.
Collect – Obtain customer feedback regularly to learn how your efforts meet their
expectations.
Consider the following tips to help prevent customers owing you money.
It's always good practice to clearly outline your expected terms of trade
and payment at the beginning of a customer relationship.
invoice dates
If your sales staff are rewarded for sales, sometimes they might 'bend the
rules' to book another. Make it a policy that you only pay out rewards
once the money has been collected rather than when the sale is made.
My customers are affected by the global slowdown and can’t pay on time. How do I
maintain positive cash flow?
These are some of the questions that businesses face. The answer lies both in the “here and
now” and in the “future-forward” thinking and actions. What businesses must realize is that
a reactive approach can help them survive, and hence react they must. But parallelly, they
also need to have a proactive action plan to ensure that they thrive.
Accounts Receivable management is all about ensuring customers pay their invoices on
time, with least amount of effort from your end – thereby improving your cash flow while
keeping the cost of collections low. And of course without sacrificing your customer’s
experience.
At a more granular level, a measure to see how your AR is doing can be Accounts
Receivable Turnover Ratio. Receivables turnover ratio is calculated as:
Net credit sales constitute the revenue generated from sales where cash is to be collected
later, minus any sales returns. ‘Net credit sales’ are used instead of net sales because cash
sales don’t lead to receivables. Credit sales lead to receivables.
A high Accounts Receivable Turnover Ratio indicates efficiency in the company’s collection
of receivables. It may also mean that the business operates more on cash sales than credit
sales.
Managing Customers
Managing Overdue Customer AccountsPage 12
These are times of crisis for your customers too, so being empathetic is important across all
your touchpoints and decisions. It is advisable to segregate your customer-base on the
basis of likeliness to pay. Transactional (eg invoices, payments) and the client behavioral
data (delays, broken payment promises, etc) can come in handy. This will help in
prioritizing the collection efforts and designing your communication plan.
It was a quarterly or maybe an annual affair to check on the customer credit before. But in
these volatile times, you constantly need to be aware of the credit profile of your
customers. Any changes in your credit profile should trigger your next step.
Remote working is only going to add to the challenges for your receivables! Clear
communication and expectations setting is crucial for your remote teams to do what they
do best – strengthen your relationship with customers.
Automation
Start with automating basic customer communication. Remote or not, you don’t want to be
late while expecting the customer to pay you on time. Evaluate specific AR management
tools.
This is the need of the hour. Accelerate payments by 20-30% by enabling your customers
to pay through Payment Gateways (PG) – right out of your reminder emails. B2B PGs can
operate on flat costs, irrespective of the amounts transferred. Incentivize your customers to
pay online.
The process of managing money-in, is something that has been such a ‘day-to-day’ and
‘done to death’ task, that the challenges it has are hidden in plain sight. External
uncertainty demands that we change that. It’s time to evaluate some of the interventions
and technologies that can help you augment what you already have – and then take it to the
next level. Since the well being – if not the survival itself – of the business, is at stake.
Debt settlement is an agreement between a lender and a borrower, typically for a large,
one-time payment toward an existing balance in return for the forgiveness of the remaining
debt. It is often used when a borrower cannot keep up with their unsecured debts.
With credit card debt, for example, you might be able to cut your balance by up to
50%.1 For example, if you owe $20,000 on a credit card, and can scrape up $10,000 in cash,
you might be able to settle for that amount.
Lenders are not legally obligated to lower your outstanding debt, but because they want to
protect their bottom line, they may agree to a debt settlement to avoid taking an even
greater loss.
Managing Overdue Customer AccountsPage 15
The Risks of Debt Settlement
Although a debt settlement can take some of the pressure off you, there are risks and
downsides to consider.
First, a debt settlement will affect your credit score. That will make it more difficult for you
to get credit or good interest rates in the future. A debt settlement will typically remain on
your credit report for seven years and you cannot remove it before then. On the plus side,
settling a debt will have less impact on your score than failing to pay completely.4
Finally, when you settle a debt with a credit card company, you risk having that account
closed once the settlement is complete. So you could potentially have no credit line and no
ability to use a credit card to make purchases.
If you're negotiating on your own, you'll want to explain your financial situation to your
lender, and the sooner, the better. If your lender understands that you cannot pay your
bills, and why, it will be more likely to work with you on a solution.
You should also avoid spending with a credit card that has a balance you want to settle.
Lenders are less likely to settle if your credit card statement includes, for example, several
charges for luxury goods. To improve your chance of success negotiating with a credit card
company, try to avoid using that card for three to six months before you request a
settlement.
Consider starting debt settlement negotiations by offering to pay a lump sum of 25% or
30% of your outstanding balance in exchange for debt forgiveness. However, expect the
You can potentially lower your credit card debt by negotiating with a lender either on your
own or with a debt settlement company, but keep in mind that a creditor is not legally
obligated to accept less than what you owe.8
If you cannot lower your total debt obligations through a settlement, you can try other
strategies to help reduce the burden. For example, you may want to ask your credit card
company if it can lower your card's annual percentage rate (APR) or provide an alternative
payment plan that works for you. You can also consider debt consolidation through an
additional loan that results in lower monthly payments.
3.2 How to Negotiate With Your Creditors and Settle Your Debts
David Haynes is a full-time attorney experienced in basic bankruptcy concepts, as well as
secured transactions, liens, and lawsuits in bankruptcy court. He currently serves as the
senior attorney and privacy officer at the Office of Systems Integration in Sacramento. Over
the course of the last decade, he has written about complex bankruptcy topics for various
publications, including The Balance and the Loyola Los Angeles Entertainment Law Review.
He also provides legal advice relating to complex, sensitive, and high-profile IT contracts.
If you are very far behind on your monthly payments, then a creditor or collection company
is probably already calling. If so, the easiest way to start negotiations is to inform the caller
that you wish to settle the debt.
Have a Strategy
The general strategy of negotiating with your creditors is fairly straightforward: Pay what
you can reasonably afford on the outstanding debt that you owe. This, of course, must be
balanced with how much a creditor is willing to accept. Generally, creditors will prefer a
You have nothing to lose (and maybe a lot to gain) by starting low. This means that you
should certainly not make the highest offer you can afford at the outset.
A creditor will likely counter your offer with a higher amount. If you start low, this will
make it more likely that the creditor's counter-offer will be closer to the range you can pay.
It is essential to maintain a positive atmosphere and tone when dealing with creditors.
Although a bill collector may be unpleasant, if you are professional and positive, you will be
more likely to reach a settlement.
Not every creditor will respond positively, but even if only some of your creditors agree to
a settlement, this still gives you much more wiggle room for repaying the others.
A settlement agreement protects you if you pay the creditor, and the creditor changes its
mind and demands payment on the remaining amount. A settlement agreement will
absolutely be necessary if a creditor has already sued you.
2
The settlement agreement should always be in writing. Although it is not necessarily cost-
effective to involve an attorney, it is sometimes in your best interests to do so.
Debt settlement can have the tremendous positive effect of allowing you to avoid filing for
bankruptcy. However, the downsides include having to work with multiple creditors and
no guarantees of success.
Keep in mind that a debt settlement will be reported on your credit report and may lower
3
your credit score. However, the debt is already on your credit report, bringing your score
down. A debt settlement gives you the opportunity to start rebuilding it.
A settlement agreement protects you if you pay the creditor, and the creditor changes its
mind and demands payment on the remaining amount. A settlement agreement will
absolutely be necessary if a creditor has already sued you.
2
The settlement agreement should always be in writing. Although it is not necessarily cost-
effective to involve an attorney, it is sometimes in your best interests to do so.
In many international agreements, from the Kyoto Protocol on greenhouse gas emissions to
the 1993 Arusha Accords on peace in Rwanda, there are strong incentives to not comply
with the agreement. (The Prisoner's Dilemma is a good metaphor for these situations.)
There are several ways of overcoming these problems. One is to use third parties, who help
ensure successful negotiations and can later help monitor and verify compliance with an
agreement. This essay focuses on monitoring agreements, and methods that help ensure
compliance with an agreement.
What is monitoring?
Peace agreements can be lethal instruments when they are poorly designed and poorly
enforced. For example, the 1994 Tutsi genocide in Rwanda occurred after the failure of the
Arusha Accords, partially because of an inability to monitor the terms of the agreement.[1]
One key to the ability to enforce a peace agreement is the design of the agreement itself.
One cannot separate the terms of peace from the realization of those terms, so provisions
for monitoring peace agreements are quite important.[2] According to
Boulden, monitoring should be divided into two distinct areas:[3]
At all levels of involvement, one of the chief strengths of monitors -- be they third-parties or
otherwise -- is to increase the amount of information shared among the parties. It is
generally thought that rational people, sharing information, will be better able to agree and
coordinate actions than those in information-poor environments.[4] After violent conflicts,
when trust and information are scarce, it is easier for mediators to increase trust by
increasing information flow, than vice versa.
It is helpful to compare issue areas, and to generalize some rules of thumb for designing monitoring
procedures. Table 1 compares rules for monitoring environmental standards, as laid out by the
Canadian Council of Ministers of the Environment, to rules laid out by the U.N. Peacekeeping
Operations for Disarmament, Demobilization, and Reintegration. While this comparison is far from
comprehensive, it provides good examples of tasks that might be included in monitoring
procedures.
Methods of Payment
To succeed in today’s global marketplace and win sales against foreign competitors, exporters must
offer their customers attractive sales terms supported by the appropriate payment methods.
Because getting paid in full and on time is the ultimate goal for each export sale, an appropriate
payment method must be chosen carefully to minimize the payment risk while also accommodating
the needs of the buyer. As shown in figure 1, there are five primary methods of payment for
international transactions. During or before contract negotiations, you should consider which
method in the figure is mutually desirable for you and your customer.
Cash-in-Advance
With cash-in-advance payment terms, an exporter can avoid credit risk because payment is
received before the ownership of the goods is transferred. For international sales, wire transfers
and credit cards are the most commonly used cash-in-advance options available to exporters. With
the advancement of the Internet, escrow services are becoming another cash-in-advance option for
small export transactions. However, requiring payment in advance is the least attractive option for
the buyer, because it creates unfavorable cash flow. Foreign buyers are also concerned that the
goods may not be sent if payment is made in advance. Thus, exporters who insist on this payment
method as their sole manner of doing business may lose to competitors who offer more attractive
payment terms. Learn more about Cash-in-Advance.
Letters of credit (LCs) are one of the most secure instruments available to international traders. An
LC is a commitment by a bank on behalf of the buyer that payment will be made to the exporter,
provided that the terms and conditions stated in the LC have been met, as verified through the
presentation of all required documents. The buyer establishes credit and pays his or her bank to
render this service.
Documentary Collections
A documentary collection (D/C) is a transaction whereby the exporter entrusts the collection of the
payment for a sale to its bank (remitting bank), which sends the documents that its buyer needs to
the importer’s bank (collecting bank), with instructions to release the documents to the buyer for
payment. Funds are received from the importer and remitted to the exporter through the banks
involved in the collection in exchange for those documents..
Open Account
An open account transaction is a sale where the goods are shipped and delivered before payment is
due, which in international sales is typically in 30, 60 or 90 days. Obviously, this is one of the most
advantageous options to the importer in terms of cash flow and cost, but it is consequently one of
the highest risk options for an exporter. Because of intense competition in export markets, foreign
buyers often press exporters for open account terms since the extension of credit by the seller to
the buyer is more common abroad. Therefore, exporters who are reluctant to extend credit may
lose a sale to their competitors.
Consignment
Consignment in international trade is a variation of open account in which payment is sent to the
exporter only after the goods have been sold by the foreign distributor to the end customer. An
international consignment transaction is based on a contractual arrangement in which the foreign
distributor receives, manages, and sells the goods for the exporter who retains title to the goods
until they are sold. Clearly, exporting on consignment is very risky as the exporter is not guaranteed
any payment and its goods are in a foreign country in the hands of an independent distributor or
A contract of employment is a legally binding agreement between you and your employer.
A breach of that contract happens when either you or your employer breaks one of the
terms, for example your employer doesn't pay your wages, or you don't work the agreed
hours. Not all the terms of a contract are written down. A breach may be of a verbally
agreed term, a written term, or an 'implied' term of a contract.
B. Employment contracts
Your pay has special additional protection and in some situations your employer may be
prevented from taking money out of your pay even if this wouldn't be breaching the
contract.
If you think there's been a breach of contract, check the terms of your contract to make
sure. If there has, you should try to sort out the problem directly with your employer first
of all.
C. Mediation
Before taking legal action, you are required to try other ways to sort things out. For
example, you might try mediation through the Labour Relations Agency.
Workplace disputes
If you can't sort the problem out with your employer, you can decide to take legal action.
Think carefully before taking any legal action against your employer. Ask yourself what you
want to achieve and how much it will cost. Remember that you'll only get compensation
(called 'damages') if you can prove real financial loss, if for example, your employer doesn't
pay your wages. There's no compensation for distress or hurt feelings.
If you do decide to take legal action, it can either be through an Industrial Tribunal or
through a civil court.
If you breach your contract, your employer should try to settle the matter with you
informally, but they can sue you for damages in the same way you can sue them.
Your employer would normally use a county court for a breach of contract claim. The only
way your employer would be able to make an application to an Industrial Tribunal is in
response to a breach of contract claim that you have made.
Damages are only awarded for financial loss, if you don't give enough notice for example.
They might be for the extra cost of hiring temporary staff to do your work, or for lost
revenue.
You would still have the right to wages you earned before you left, plus pay for untaken
statutory holiday. The most common breaches of contract by an employee are when
Most issues about breaches of contract can be answered by checking the terms of your
contract. You will find some common ones here.
You won't necessarily get paid for time that you're not at work but your employer should
be careful about imposing extra penalties on top of this. If there's nothing in your contract
that allows your employer to do so, they must pay you what you've earned and then decide
whether to sue for any money they've lost because of your lateness.
Employment contracts
An outstanding check is a check payment that is written by someone but has not been cashed
or deposited by the payee. The payor is the entity who writes the check, while the payee is the
person or institution to whom it is written. An outstanding check also refers to a check that has
been presented to the bank but is still in the bank’s check-clearing cycle.
One of the ways of making payment for a transaction is by check. A check is a financial
instrument that authorizes a bank to transfer funds from the payor’s account to the payee’s
account. When the payee deposits the check at a bank, it requests the funds from the payor’s
bank, which, in turn, withdraws the amount from the payor’s account and transfers it to the
payee’s bank. When the bank receives the full amount requested, it deposits it into the payee’s
account.
Outstanding checks aren't necessarily inherently bad; however, there are some risks and
downsides to have checks linger.
An overdraft occurs when the account holder who wrote a check that is still pending does not
have enough money in their account to cover the amount of the check when it is eventually
submitted for payment. This can result in the account becoming overdrawn.
Accounting inconsistencies may arise if outstanding checks are not reported and tracked in the
appropriate manner. Because of this, keeping correct financial records can be difficult, and it
may lead to problems during audits or when reconciling finances. For example, payments may
show as being paid but if the cash has not yet been debited from the account, there may be
inconsistencies worth reconciling.
Forgotten outstanding checks are a common source of bank overdrafts. One way to avoid this
occurrence is to maintain a balanced checkbook. This can help prevent any unnecessary NSFs
if the payee decides to cash the check at a later date.
You can also call or write to remind the payee that the check is outstanding. This may
encourage them to deposit or cash the check. If they haven't received the payment, this may
nudge them to notify you to reissue the check.
When a business writes a check, it deducts the amount from the appropriate general ledger
cash account. If the funds have not been withdrawn or cashed by the payee, the company’s
bank account will be overstated and have a larger balance than the general ledger entry.
As businesses have to abide by the unclaimed property laws, any checks that have been
outstanding for a long time must be remitted to the state as unclaimed property. As such, there
is no incentive to wish for an outstanding check to permanently never be cashed as the
payment is subsequently owed to the government for holding.
Outstanding checks are checks that have been issued but not yet presented for payment or
cleared by the bank. They represent pending transactions where the funds have not yet been
deducted from the issuer's account.