How do you lower average collection period?

Answer 1

Start by determining your days average collection ratio. If the ratio is >14 days past your net terms the process you are currently using is broken.

Establish your weighted credit extension policy. What $ amount you will extend to each customer. Use past history to establish this value and build quantifiable criteria based on you financial statements. Once the weighted process is defined establish the process that will be followed from the (buy) date until the net term date.

Establish this collection policy in writing (very important) now pass along the accountability to a staff personnel that can be quantifiably measured to your newly defined policy. Full benchmarks and accountability should be give to that staff personnel, because that will be a criteria for the individual to cover his/her labor burden and provide profitable value for their results to your bottom line.