New York (June 2, 2004) -- Accounting firms would benefit from better accounts receivables practices, according to Yu-Soon (Hugh) Koh, CFO of STA International, a business credit management organization.


Good AR polices include a continuous review of your firm's credit policy, and differentiating potential bad debts from sound clients (among the red flags are payments by post-dated checks, or constantly late payments, or both; frequent changes in management; low levels of liquidity; and a frequent change of banks).


When more time is requested on a payment, he advises, let the client know that time is money, and that they may be able to buy time by providing a down-payment and scheduling the balance of the debt. This gives you an up-front payment, and provides you with confirmation of debt in case you encounter a situation where the client disputes the balance.


Collection policies should also adhere to strict credit limits, and avoid providing extended payment terms.


It’s also beneficial to adopt certain essential practices to prevent the occurrence of delinquent accounts, he says. For example, incorporating a clause regarding payment terms in your engagement letter will clearly state your arranged compensation conditions. And check your prospective client’s credit rating to help recognize and avoid potential bad debts. Prepare your invoice to prominently show your payment terms, due dates and late-payment interest charges policy.


-- Jeff Stimpson

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