What are the cash collection methods?

• monthly statements – these can be produced quickly and easily by any computerized sales ledger system and sent to customers. Exactly how much impact they have is however debatable
• chasing letters – these should be directed to a specific person preferably at a reasonably senior level. However, preparing and sending these letters has a cost and, like the monthly statements, their impact is often limited
• chasing phone calls – these can often have a great impact as all businesses have to answer the telephone and, hence, they have a nuisance value which can generate results. A credit controller who regularly contacts a suitably senior person at their customers with overdue amounts and politely, but firmly, demands payment can often achieve good results
• personal approach – a personal approach from a senior person in the company to a senior person at the customer can often yield results. This is quite common in trades where the personal relationship with clients is important. For instance, this often occurs in professional accountancy and legal firms
• stopping supplies – this is a cash collection tool that must be used with care. If the product being sold is built specifically to the customers design, and you are the only supplier who currently makes the product, then it is a powerful tool as, in the short term, you are the only supplier and, hence, payment is likely to be forthcoming. However, in the longer term it is always possible for the customer to train up an alternative supplier to make the product. If the product is a generic product that could be purchased from many suppliers, then quite obviously this is a weak tool that is simply likely to lead to the loss of the customer
• legal action – this is costly and is likely to lead to the customer being lost
• external debt collection agency – as with legal action this is costly and is likely to lead to the loss of the customer.

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