Many debtors seem to think that creditors should always allow a grace period of at least 7 days before calling for payment status on a past due balance. On more than one occasion, I have been called impolite, rude and even unprofessional because I called to inquire about the status of past due invoices sooner than the debtor considered polite. I disagree with the necessity of waiting XX days before calling for payment status.
Why? A collection grace period benefits only your customers. In my opinion, it is not inappropriate for you to call any customer any time their account becomes past due. In fact, I think customers that allow their accounts to go past due are acting inappropriately. Another very real risk associated with creating a grace period is that customers will build your grace period into their payment cycle. For example, if you do not call until your customers until invoices are at least 10 days past due on Net 30 day terms, it is not a huge leap of logic to assume that at least some of your customers will schedule payments on or about day 40. Why? Because they have learned that 40 days is the tipping point. If they pay in less than 40 days, they are paying too soon. If you disagree with me, consider asking your company’s accounts payable manager if they would delay payment to a supplier that did not mind being paid ten days late.
That’s my opinion. What’s yours?
Michael Dennis’ Covering Credit Commentary. Michael’s website is www.coveringcredit.com.
The opinions presented are those of the author. The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors. Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.