Your Residential Collection Efforts
waste companies, managing the collection of receivables from
a residential subscription base is at best a continuing challenge.
Accounts number in the thousands and they hardly seem worth
the trouble on a case by case basis, given the relatively
small amounts involved.
how many people you have making the calls, the work is never
really done adequately. Manual shut off for delinquent accounts
never happens fast enough to catch up with pickup operations.
And sometimes, turning over thousands of dollars of uncollected
balances to a collection agency is like throwing money at
the problem with only the vague hope that 50% of it will somehow
float back into your bank account.
and foremost, do not take this area lightly. I have seen companies
go out of business simply because they did not have this aspect
of their operation in order. I cannot stress enough the importance
of the timeliness of the billing, suspension and collection
notices. Timeliness is the most important factor of the successful
information system cannot perform the functions in this document,
it is probably costing your company tens of thousands of dollars
each year. Stop giving your revenue and profits away to your
customers; get a good information system. If you have a customer
base of more than 30,000 subscriptions, you can easily justify
a new software system with the increase in collection revenue
and decrease in staff needed to work collections.
At the Beginning
people do you need for a good collection effort and how can
you recover and keep your hard-earned revenue?
involves your information system, your customer service representatives,
your drivers and, of course, your collections department personnel.
I suggest the size of your collection staff be no more than
1 to 2 people, no matter how large your customer base. Anymore
than this and it will be costing you more money than it should,
thereby reducing your profits when you finally collect those
establish a driver incentive program that is directly realted
to the number of uncollected customers on each driver's route.
Although drivers generally do not speak to the customer, they
can be critical in making your collection process work when
they are motivated to do so.
your collection procedures must be the most methodical in
your organization. If you act consistently, the dollars will
come flowing back to your bank account on a regular basis.
and drivers can be trained and retrained and, if all else
fails, replaced, which leaves your information system as the
key to this entire process. The management of information
in a methodical and automated manner is the glue that holds
it all together.
sure you have an information system where the operations,
billing and receivables are in the SAME information base.
If you use a separate application for routing, and another
for billing, and possibly a third for accounts/receivable
and collection management, stop here and fix that problem
immediately. In other words, look into replacing your fragmented
system with one that is more integrated.
have multiple corporations within your organization structure,
serving your residential customers through separate databases,
fix this problem before continuing. This means you must find
a way to identify customers centrally, no matter how splintered
the operation on your end or theirs.
do not have these issues or you have corrected them, now you
can proceed to organize your collection procedures properly.
Methodical, automated management of information is essential.
If you notify the customer today to pay his bill by Friday
or he will be suspended, but your driver still collects that
customer's waste on Friday anyway, you might as well throw
that notice in the trash.
if you have multiple databases and shut a customer off under
one of your business names, there is nothing to stop that
same customer from signing up for service under another of
your business names.
issues alone illustrate how quickly the information system
structure becomes critical to your collection success.
are four major parts to the successful collection process:
2. Managing collections notifications and its support actions;
3. Making your drivers part of the collection process;
4. Turning your real loser customers over to collection agencies
on a timely basis.
customers is either part of the problem or part of the solution;
it is critical to perform billing on a very consistent schedule.
If you bill every two months for service, do it exactly the
same way each time. The customer bills should be created and
mailed by two days before the first day of service.
a service period from July 1 to August 31 should be mailed
by June 28. The due date should be by the end of the first
month of new service, in this case July 31.
make it easy to pay the bill. Offer return envelopes, payment
by direct withdrawal (known as ACH), payment by credit cards.
The easier you make it, the less likely you are to have a
collection problem later. Offer programs which allow the customer
to pay for six months' service at a time, including a discount
for the six months' payment. The discount should not exceed
the interest you can gain by having that extra cash in the
bank. Don't let an early payment program cost you profit.
sure your bill is clear to the customer. Show the following:
and address serviced;
2. Any past due balances;
3. The date when the balance due was calculated;
4. New service charges;
5. The total amount owed;
6. The date the balance must be received by your company;
7. Any dunning notice for the past due amount(s);
8. The service period being billed.
effective, you should not use the bill as a suspension notice.
Test your bill with individuals who have never seen it before.
Ask their opinion as to its clarity. The last thing you need
is to receive a thousand calls having to explain what the
bill means and how much is owed. Good, easy to understand
bills will cut down on the number of customers who enter your
collection process, so do a good job upfront and reap the
way to simplify the process is to split your customer base
into two groups if you bill every other month, or three groups
if you bill quarterly. The billing procedure will happen each
month, cutting the number of bills and receipts which have
to be managed by your customer service staff.
Managing Collections Notification
you have identified a group of customers with balances unpaid
for at least two periods. You need to act swiftly to bring
these customers into line with your required payment standards.
Use your information system to build a list of overdue customers
based on the amount of their current balance and the age of
the balance. Anyone with an unpaid balance of more than 25%
of your period billing amount should be on this list. Please
do not suspend a customer who owes less than this; you will
only lose that customer.
you have the list, review it for any customers who are possible
exceptions to the general suspension rules and remove them
from your register. If a customer has already called and made
arrangements regarding the bill, do not send them a notice.
suspension notices for the customers remaining on your list
and mail them in a timely manner. You must provide a reasonable
window for the customer to respond, so do not mail a notice
with a suspension date five days or less from the time the
customer receives the notice. Even though the customers are
at fault, don't give them a reason to make an antagonistic
suspension notice should include:
account number, name and address of the person being billed
and the service address, if different from the billing address;
2. The full amount due;
3. The date the amount should have been paid;
4. The date the customer's service will be terminated if the
balance is left unpaid;
5. A number for customer service; this allows the customer
to resolve problems unknown to you or to pay the bill by telephone
via credit card.
note, credit cards are a way of life; don't short change your
company by refusing to offer this payment option or failing
to allow for the cost of accepting credit cards. Determine
the direct cost of managing credit card payments and build
it into your billing rates across your customer base. It will
amount to a few pennies and your customer base will be paying
for the option, not your company.
your notice is out on time, you and your system need to be
ready to take action to enforce the words on that piece of
paper you just mailed. Mark each customer account with the
planned suspension date. If the customer pays as required,
clear the suspension date and remove the suspension status.
Ideally, the system should do this automatically as soon as
you enter payment. The receipts register should list those
customers coming off suspension status for review purposes.
The operator should not have to intervene to make the removal
happen, otherwise it could be forgotten accidentally, which
will result in an angry customer on the telephone using up
valuable customer service time.
Your Drivers Part of Your Collection Process
what your drivers' role should be in the collection process.
Create an incentive bonus for each billing period for the
number of customers who are fully paid up, based on a percentage
of customers serviced. For instance, if the average number
of customers with open balances is 10%, offer the bonus to
those drivers with less than 7.5% or 5% overdue. Make sure
you can generate a report that clearly shows this statistic
for your drivers' use; do not spend time with them haggling
over who is and is not overdue.
sure the bonus is significant enough to make it worth their
while to help you. If you offer $10 per period, they will
not work hard to enforce suspensions.
two types of weekly route sheets for each route: a detailed
report showing all stops to be serviced or suspended, and
an exception route listing of all those who are new starts,
vacations, suspended or those needing special services. The
suspended customers must be clearly marked, bolded if possible.
Make sure your drivers understand how to read the reports.
It is critical that the route sheets list the customers in
the order in which they are serviced, otherwise it may be
more trouble than it is worth for the drivers to use the sheets.
With Collection Agencies
years I have worked with waste companies, the first item I
always review with them is the condition of their receivables.
In too many cases, I have found tens of thousands of dollars,
if not millions, uncollected and open in the receivables detail.
long as these items remain in receivables:
are overstating the amount of money you can collect. Thus
you have overstated your assets and are not accurately representing
the total assets of the company.
2. You are paying taxes on revenue you may never collect.
You can reduce your bottom line by taking the bad debt expense
3. You cannot use any cash that you might gain if you recover
some of the dollars via a good collection agency.
like the suspension notice, a collection agency notice is
a strong tool in recovering receivables. So how do you proceed?
First, select a good collection agency with a strong track
record in collecting small balances. Make sure they understand
your business process. Waste management is a virtual unknown
to most of the public, so take the time to explain what they
agency will be facing. The agency should make a clear offer
to assist your customer in resolving the disputed amount,
including re-instating them with your company for future service.
Of course, the customer must first pay the balance in full.
information system should support this aspect of your collection
process as well. Once you choose an agency, use the system
to build a register of customers who are currently suspended
and have open balances over two periods old. If your billing
periods include more than two months of service, you may want
to act at the period and a half point. Timing is critical,
for the longer the balance remains unpaid, the more likely
it will never be paid. The balance used to build the report
should be based on a minimum open balance. Again, refrain
from turning a customer over to an agency for a ridiculous
balance, such as 50 cents.
the register is built and reviewed for accuracy, it is time
to print a notice to the customer informing him that the account
is being turned over to a collection agency. You may want
to use this as an in-house collection tool by putting a drop
dead date for the customer to respond. If they pay you and
not the collection agency, there is obviously more to gain.
notice should include:
customer's account number, name and address;
2. The balance in dispute/open;
3. The date the balance was due;
4. The date the account will be sent to the collection agency;
5. A warning as to the possible damage to the customer's credit
6. A telephone number to call before the "drop dead date";
otherwise, the number for the collection agency.
your accounting system should do the following:
a credit to the receivables balance for each customer on the
register for the full amount owed;
2. Create a bad debt entry for each customer for the same
full amount owed;
3. Create an electronic file of customers who are on the register
to be sent to the collection agency according to their format;
4. Provide a general ledger journal summary entry to support
the write off balance established by this register.
customer resolves the balance issue with a payment, apply
that payment to the bad debt journal open for that customer
first, with any remaining balance applied to reopening the
the cost of the agency's services is generally not recoverable
and is part of the expense of doing business. Check with you
legal counsel to see if the wording of your collection notice
will render your customer liable for the cost of collection
service as well. This might be a condition of re-instatement
Many factors contribute to making a successful residential
collection process. It takes your collection department, customer
service reps, drivers, collection agency and your information
system all working in unison to maximize the return. If they
all work together at optimum efficiency, you will enjoy the
strength and security of a steady influx of collection income.