11 Surefire Tactics To Gain Control Of Receivables

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If you have a receivables problem, now is the best time to contain it. Most agencies with receivables problems believe they appeared suddenly, but in reality the problem had existed for some time.

Controlling receivables is nothing more than training your clients and your producers and the staff persons who support the producers.

Monitoring should be ongoing, and that requires discipline.

Here are 11 steps that will get receivables under control and keep them that way:

1. Have a formal, written collections policy and enforce it.

2. If you have a receivables problem, meet with each producer every few days until they find the source of the problem. For those problems you will be unable to clear up right away, require that a signed note if the client is willing. When they are unwilling, start cancellation and collection proceedings.

3. If a particular producer has a problem, conduct a person-to-person review of the receivables. Set weekly goals to complete until the producer has them under control. When you sit down with them each week, make their goal the first item on the agenda. Start with the accounts that are more than 90 days past due, and once those are under control, start working on the over 60s.

4. Charge receivables back to the producer when they reach over 90 days past due, unless the producer is willing to guarantee them personally.

5. Don't make exceptions-and make that part of your agency's collections policy.

6. Designate a person in the agency your 'Collection Manager,' (CM) and design a demand letter to send to past-due clients, which calls for some action from the client before a deadline. The letter should also include client contact with the CM to make payment arrangements. Then, if the client does not respond, make arrangements with an attorney to send a letter for a fee. If the client again does not respond, then have the attorney threaten legal action. If that fails, start the action. Making these tough decisions now will assist in resolving the problem for good, and your collection policy enforcement can keep your system in order.

7. Make it your agency policy to not bind anything without either a premium up-front or a signed financial agreement accompanied by an appropriate deposit premium.

8. Make "receivables control" an office-wide project, involving all staff and producers. Communicate this policy to all of them.

9. Train your producers to set an agreement on payment terms as a part of the proposal presentation, whether it is on a new account or a renewal account. Include payment terms in the written proposal to the client.

10. Determine each of your carrier's positions on uncollectible audits. Whether they allow turn-backs or not, be sure each of your producers and customer service representatives understands the carrier's position. One way to do this is to have each carrier and their terms displayed on a matrix, which is accessible either on your system or in printed form. Then hold them accountable for monitoring what happens. Use your automation system to create a report of outstanding and uncollected audits. If the carrier does not permit audit turn-backs, you'll want to consider not placing auditable policies with them. If you use the carrier anyway, then you want to feel comfortable that your premium base is adequate for the risk. On a new account, you may consider interim audits to monitor progress.

11. Use company-direct billing plans on risks that have had payment problems. Forewarn the client that the company will probably not reinstate them if they are canceled for nonpayment, or that the company will reinstate them only once after a nonpayment cancellation. That's one way to deal with a carrier with a no-audit turn-back policy: Make the carrier responsible up front!

Receivables control is an absolute necessity in today's agency. You can get in immediate financial trouble if you don't control them.

Strictly adhere to a set policy, and you will find that eventually the process becomes automatic. You can certainly spend your time on more productive activities, and so can your producers and staff!

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