Tuesday, March 23, 2010

Non payable and non recoverable payments

Here’s the scenario: the accounts receivable department finds out a delinquent amount of money from a client of yours. Such customer has been a client for years, and consistently and promptly pays around $200.0 each month for services provided.

The accounts indicate that such charges derive from a difficult to track type of service, and there are notes related to your staff contacting the client about this a year ago. It is not clear what the outcome is in such notes; but the fact in your books and systems is that there is around $50.00 in arrears.
Q1. Do you send such claim to a collections agency? (Chances of recovering 50% such amount)
Q2. Do you contact the client and ask for payment? (Chances of recovering 25% such amount)
Q3. Do you simply cancel the amount as unrecoverable and move on? (Chances of recovering 0)

What to do?
Please stop reading for a minute and think hard about this picture.

Facts show that the client is consistently paying other services; so it is very likely that we made a mistake. Even if we did not err, and in fact the client did not pay; it is very likely that there is a good reason for that.

A3. Send a letter to your client along the lines of: “…we recently found out a pending payment amount of $50.00; however, we believe this has somehow been a glitch in our invoicing processes and therefore we have decided you owe us nothing. Concretely, we’d like to thank you for your loyalty during the past X years and hope we can offer you more and better services. Please do not hesitate to contact us with any questions you might have…”

A2. Same as A3.

A1. Same as A2.

Why? Well, we do not have all the facts, or have the wrong or incomplete ones. Transferring it to collections will simply upset the client; who independently of being at fault or not and whether they pay or not; most likely will go elsewhere for the services we’ve been providing. We will lose a client, a recurring $200.00 per month; and most probably will lose some -and will never make other- clients that are acquaintances of this one.

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