AR Procedure

2.1 Collection is the process of collecting moneys from customers in accordance with the terms as stated on the invoice. 2.2 A good collection procedure is as essential as the actual service / sale for the profitability of the company. Slow paying customers create significant cash flow problems as well as costing the company time and money to make the collection and, when applicable, interest expense on borrowed working capital. Regardless of the potential profit of a service / sale, if the business fails to collect, we all lose! 2.3 Effective collecting procedures begin well before the invoice is due and payable. The elimination of problems before the payment day will greatly enhance the ability of the business to be paid on time. 2.4 Collection procedures are based on persistent and constant follow up with a mixture of controls that become increasingly severe. Since circumstances vary depending on the type of service / sale, several different alternatives are available. It should be noted that the collector should never threaten to stop future credit terms or initiate legal action unless you intend to follow though.