Collections: It Isn’t Rocket Science – February 8, 2018

Collections: It Isn’t Rocket Science

by Kate Anderson
Credit Manager for Allied Affiliated Funding

We all know that cash flow, or the lack thereof, can be the life or death of a business. Companies need working capital to survive and grow. Back in my early days in the 90’s when I owned a collision repair shop, I learned quickly that my top priorities focused on having sufficient capital for the needs of my business. There were even a few times that I panicked, feeling I would miss payroll, supplier payments, or even our bank loan payment. Somehow though, we always made it through. We were very successful as entrepreneurs, expanding our brand into auto and glass repair, along with parts and even car rentals. I am happy to say that business is still thriving today!

From those early days until now, and being in the world of finance myself, it has definitely been a journey. I have worked at Allied Affiliated Funding for over 12 years, focusing on debtor credit and collections. As a former business owner and now the Credit Manager for Allied Affiliated Funding, seasoned experts like myself know that there are certain practices that can be implemented to prevent cash flow challenges while helping to ensure that cash flow is both predictable and consistent.

So where do you begin?

I am going to share a few practical tips that, once you make them part of your own process, can and will make a difference in your collection of Accounts Receivable (AR).

According to a survey conducted by, out of 250,000 invoices studied, 18 percent of the invoices were paid upon receipt, 63 percent were paid “on time” and a whopping 16 percent were never paid.1 You see, just creating an invoice and sending it via mail, email or electronically does not guarantee that the invoice will be paid. You might be putting your company at risk by just sitting back, waiting and expecting payment per the terms of your invoice. I say, “If you don’t ever get paid, then you might as well have gone fishing.”

Three Tips…..


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Tip #1. Know your customer and their exact requirements for invoicing:

Businesses have varied procedures that must be followed to properly invoice them. You need to understand exactly what those procedures are for each customer. Know their ability to make payment per the terms of your invoice. Know who approves your invoice, and know who the person in Accounts Payable (AP) is that handles the processing and payment of your invoice. Typically, the approver and the AP person are not the same.

Also, do not simply assume that because you sent your invoice to the approver that it was approved and automatically forwarded to AP. That assumption can become quite costly. Throughout my years of experience, I’ve witnessed a breakdown occurring time and time again whereby invoices were sent to the appropriate approver, but the approver never acted on the invoice by approving and forwarding the invoice to AP. Therefore, AP never even knew the invoice existed. If unsure, send your invoice to both, thereby creating some accountability for handling. Remember, if AP doesn’t have your invoice for processing, it will not be paid!


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Tip #2. Verify:

Merriam-Webster’s definition of verify is “to establish the truth, accuracy, or reality of.” Once your invoice has been submitted and approved, then it’s time to verify the invoice with AP. Why is this important? Because you need to know that your invoice wasn’t rejected for any reason. You want to make sure it was entered into the AP system and is being processed for the correct amount and date. It’s always best to make sure this information is correct, as input errors can and will occur. They are much easier to correct earlier in the process than later.


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Tip #3. Confirmation:

Again, looking at Merriam-Webster’s definition of confirm: “to give new assurance of the validity of.” So, you might be thinking to yourself, “I’ve already verified so why do I need to also confirm?” This is a very important step to getting paid. Your invoice has been approved; you’ve verified that it’s being processed for the correct amount and date according to the terms. Now, you can confirm with AP that it will be paid. This is when you can finally anticipate that the payment will be issued either electronically or via mail. This still does not guarantee payment, but it does give you the history you need in case you ever have to pursue collections or take any legal remedies to get paid.

I know this is not “rocket science,” but you may be surprised by how many companies don’t take some of these simple steps, but rather wait and expect invoices to pay in a timely manner. Invoices can be paid and work without all of this. However, the question comes up, “What if they don’t pay, and I don’t know for several months that there was an issue?” That is precisely why you want to consider having processes in place. If you know early on that your cash flow will be impacted, you have an opportunity to intervene and prevent that from happening.

One final and crucial piece of advice; strive to establish personal connections with AP personnel for your various customers and really get to know them as a person. Take the time to be genuine and kind to the people you are working with at the company. This is probably the greatest bit of advice I can give you, and it has served me well over the years. In other words (or rather the words of Maya Angelou), “Be a rainbow in someone else’s cloud.”

1Survey results by John Rampton, Founder and CEO of and a self-proclaimed serial Entrepreneur; he is an author and contributing writer for Forbes,, Inc. and The Huffington Post.