By Avi Grunwald.
An overdue invoice arrives in your inbox with a familiar question: “Should we send this to collections?” Your client has made calls, sent reminders and spent more time on the account than expected. The frustration is understandable. But before discussing the next step, ask whether someone unfamiliar with the customer could open the file and understand the balance.
That is a useful test for accountants advising business clients. A collection agency needs enough information to explain the claim and respond to questions. A spreadsheet showing a customer name and an unpaid amount leaves much of that work unfinished.
These five checks can help your client prepare a commercial account for referral and keep the records accurate afterward.
1. Confirm who owes the balance and what was agreed
Start with the customer’s legal business name and compare it with the contract, credit application, purchase order and invoices. A trading name, related company or different billing address can create uncertainty about which entity placed the order.
Then locate the agreed payment terms. Ask whether the customer accepted a written proposal, issued a purchase order or approved a later change. If your client says the terms changed during a phone call, ask what written confirmation followed.
Flag inconsistencies instead of silently correcting them. The purpose is to give the next person a clear account of the transaction, including anything that still needs an explanation.
2. Gather the records that explain the invoice
An invoice shows what your client billed. Supporting records help explain the work or goods behind that charge. Depending on the transaction, these might include delivery confirmation, service records, an approved scope of work or correspondence acknowledging completion.
Ask your client to organize those records around the unpaid invoices. A large folder of unsorted emails makes a simple question harder to answer: which document supports this particular charge?
Include changes that affect the amount. An original proposal may tell only part of the story if the customer later approved additional work or the parties agreed to remove an item. A short chronology can make those changes much easier to follow.
3. Reconcile the balance as of the referral date
Do not assume that the amount on an old aging report is still the amount outstanding. Review subsequent receipts, credit memos, adjustments and unapplied cash before the account leaves your client’s office.
For illustration, a customer with a $12,000 invoice might have sent $2,000 and received an agreed $500 credit. The remaining balance is $9,500. If the payment sits in unapplied cash and the credit exists only in an email, the invoice record may still show $12,000.
Prepare a dated reconciliation showing how the remaining balance was calculated. Separate the original charges from any additional amounts your client proposes to include, and identify the supporting terms. Unexplained differences should be resolved before referral.
4. Record the dispute and the last meaningful conversation
“Customer will not pay” is a conclusion. Ask what the customer actually said. Was the invoice never received? Was part of the work questioned? Did the customer acknowledge the balance but ask for more time?
Those situations call for different follow-up. Preserve the relevant correspondence and identify which invoices or charges are disputed. If your client has already responded, include that response and any supporting records.
Document payment arrangements precisely: the amount promised, the date it was due and whether anything arrived. Avoid treating a tentative statement such as “we should be able to pay next week” as a firm commitment. Also tell the agency about any arrangement that remains in effect, so its first contact reflects the current position.
5. Decide who reports changes after referral
The handoff is not finished when the file is sent. Customers may continue to contact your client, and some will pay the creditor directly. Your client needs a clear process for passing those developments to the agency.
Name a primary contact and a backup. Agree on how payments, credits, new disputes and revised arrangements will be reported and acknowledged. A payment update should identify the account, amount, receipt date and any allocation across invoices.
Keep a record of the update and check that the revised balance is reflected on both sides. Posting a receipt internally does not, by itself, tell the agency that the amount has changed.
You can make this process manageable with a brief referral cover sheet: customer identity, balance and reconciliation date, supporting records, unresolved questions, last contact and the person responsible for future updates. If a field cannot be completed, your client knows exactly what needs attention. The next person handling the account can then spend less time reconstructing it and more time addressing the reason it remains unpaid.
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Avi Grunwald is the founder and CEO of Fair Capital, a New York debt collection agency serving business clients with commercial receivables and other collection needs.
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