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Our offices are now located in Southwestern Ontario but we provide services across Canada and the United States as most of our services are performed remotely.

We provide onsite services that require at least one day onsite  in Sarnia, Chatham-Kent, London, Windsor, Woodstock, Leamington, Waterloo, Cambridge, Kitchener,  Guelph, Milton, Oakville, Mississauga,  Burlington, Hamilton, Niagara Falls, Toronto, Vaughan, Markham, Brampton, Richmond Hill,  Newmarket, Whitby, Oshawa, Ajax, Pickering, Uxbridge, Pickering and  surrounding locations in the GTA and Southwestern Ontario.

For other businesses outside our local service area in  Canada who require onsite services, please contact us to discuss your requirements as outside our outlined local service area will include travel and living fees.

 

All services for the United States are only performed remotely in Canada and meetings are performed online through Zoom.

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Ensure Collection of Your Accounts Receivables





Unless you have a business where payment for a service or product is on the spot, you are most likely plagued with the onerous task of collecting from clients who ignore your invoice. You start to wonder if they see your net terms date as a suggestion and use the money they owe you to fund other things personally or in their business.

Most customers, whether businesses or consumers have the best intentions and will pay you on time or a few days late, but these are not the customers that you develop collection processes and procedures to manage.  It is only those 5-10% who will buy products and services that they really cannot afford or have every intention of not paying your invoice based on your net terms. It is these individuals or businesses that require you to have processes and procedures in place to help protect your business and your cash flow.

In dealing with many business owners, this is one of the areas which contributes to their overall cash flow issues within the business. When customers are not paying, businesses start to look at other alternatives in order make payroll and pay your creditors.  In many cases, business owners look to their HST or Payroll deductions to make ends meet. This is a decision that can land a business in a whole different level of hurt with the CRA. 

It is important that you have the processes, procedures and mechanisms in place to ensure collection of your accounts receivable promptly. The longer they are outstanding, the less chance there is for collection.

Listed below are some simple steps to follow:

Step  1:  Credit Application and Credit Process If you are selling products and services that are in the 1000’s of dollars where you do not require payment upon delivery, you need to develop a credit application and process. You need to collect information about the business,  their bank accounts, and references. The application needs to inform them that a credit check may be performed and their bank will be contacted. This is another document that you might want to have a corporate lawyer or your accountant review.  The application must be signed by the customer.  Though you will ask for three credit references, most businesses will supply people that they pay on time, which is why you need to check with their bank. Depending on the information you can get from their bank, you want to perform a credit check through either Trans Union or Equifax. 

To perform a check on their bank account, you will need to have your own financial institution perform this check on your behalf.  A bank or credit union will not provide an individual or business with this information directly. Contact your bank account manager to understand what information is required before you include this on the credit application.

A credit check through a Credit Bureau will cost you between $50-$100 depending on the service you use. You need to ask yourself how will not collecting what this particular client owes you affect your cash flow. If you are not able to perform a bank check or the report comes back questionable, it is well worth the money spent on the credit check to give you piece of mind before shipping 1000’s of dollars of products to their location.

If an individual or business has questionable credit, if you are still planning to sell to them, consider making them make installments until they prove they are creditworthy. Another alternative is to set a credit limit in which you will not let them exceed unless they pay the difference up front.

Step 2: Contract or Order Agreement  Whether you have a contract or an order agreement will very dependent on the type of business and what you sell.  Most service based businesses will utilize a contract, where a product based business can get by with using an order agreement. Both documents need to outline all of your terms and conditions and need to be signed by the customer before providing products and services. If the customer signs the contract, this is a legally binding agreement as long as it meets the laws of the province.

It is the responsibility of the business to develop the business terms and conditions, so make sure you include your credit & payment terms, shipping terms, warranty and additional terms that relate to your business. Use the services of a corporate lawyer to include required legal terms and to check the rest of the contract or agreement to make sure it is in line with legal jurisdiction where you are selling. ​ Do not pull a contract for services or order agreement off the Internet and hope it will work. The terms included may not even apply to your business or jurisdiction and may not cover you at all in the case of litigation.

Step 3: Collection and Payment Process Develop a collection and payment process for your business. If you are a services business, you might require a down payment or retainer. The same could be true if you are a manufacturer who is selling  products to a distributor or retailer. If you find out later, this is a good paying client, you can choose to waive this in the future, but in the beginning, you want to err on the side of caution. 

Your order agreement or contract which they signed will outline any additional fees for late payment.  You want to make sure your process and procedures take into account when client’s pay late. If for example, your terms are net 30, within five days you will want to send a friendly reminder that the payment is past due and to ignore if payment has been made. If the payment has not been made within an additional period of time, you want to send another letter outlining that they signed and agreed to the terms of the agreement/contract, and they are now in breach of their agreement. You might even suggest if there are issues paying, that they get in touch, and you can work out extended payment terms. If they choose to ignore this letter and do not contact you, you are most likely in a default situation. At this point, you want to inform them that if payment is not received by a set date, that you will be pursuing a further action which could include reporting to the Credit Bureau or turn them over to collection.  Individuals nor businesses want to have a strike on their credit record, so in most cases you will receive payment. If you make the threat, you need to be prepared to follow through; otherwise, you will continue to have this as an issue.

Turning their name into the Credit Bureau will affect them obtaining financing or making purchases with other vendors. If you have receivables over 90 days, in most cases these will end up being bad debt and not collectible if you are not willing to follow through.

Having a credit process that you have documented and followed will help you in the isolated case that you need to go to court to collect the bad debt. If you show, they signed a contract/agreement, received letters and made no attempt to work with you, your chances in court are much better if it has to go that far.

Step 4:  Hiring a Collection Agency – The Last Resort  We all tend to cringe the minute we hear the words “collection agency,” as we imagine these horrible people harassing and threatening people who owe money.  The fact of the matter there are many organizations that do not follow the rules, but collections is a regulated industry, and there are some very reputable firms.  

If purchases from your business are in the 10’s of thousands of dollars, you need to utilize a collection agency. It is true they will take 20-30% of whatever they collect, but if you are owed a large sum of money, it is well worth it at some point turning accounts over to collection.  Otherwise, you are spending your staff’s time chasing clients who are not paying and who are going to avoid you like the plague. Within your process, you want to state at what point the account is turned over for collection. If a customer is not paying you, they are most likely not paying other vendors as well. As a business owner, you cannot afford to continue selling to customers who are not paying. If they do not have the money, they should not be purchasing your products and services.  If you want to offer credit terms, that is perfectly acceptable, especially when you are providing services to individuals or businesses who need help, but you are in business to make money and at some point if they are not willing to work with you, you need to make the right decision for your business.

Before hiring a collection firm, check out their rating with the Better Business Bureau as well as seeing if they are a member of the Society of Collection Agencies in your province.  

Summary Making sales and generating revenue are important, but if you are not able to collect from customers on what is owed, the time spent on the front end making the income is futile. Outstanding accounts receivable can hurt your business cash flow. You need to make sure that you have a process, procedures, and contracts in place in the beginning, versus waiting until you start having an issue in this area. If you are having difficulty in this area, reach out and get help before it affects your business and your cash flow.


#accountsreceivable #collection