What Is The Audit Approach?
Over many years we have monitored the changes that occur in the collections industry and the effects they have on our clients.
We are particularly conscious of the opportunities that have arisen for us to be seen to be taking a positive role in promoting on-going relationships on behalf of our clients. This has brought about the development of a technique called The Audit Approach.
The Audit Approach is a collection tool to be used in situations where your clients appear to be taking advantage of the credit terms you agreed with them either by reason of intent or simply through oversight or temporary negative cash flow situations.
Using the Audit Approach as a first approach has four distinct benefits.
It promotes Client Retention. When we use the Audit Approach, we adopt the position of being engaged in a random audit of accounts on your behalf. We would ask your customer to verify details of the account. This immediately focuses your customer’s attention on the current status of their account with you without burning any bridges.
It gives Early Warning of any account, which could turn into a delinquency. This approach would normally prompt a response to you from your customer within a few working days with either a payment or an offer to pay or an explanation of why the invoice or invoices have not been paid. If they do not respond, it gives an instant warning of a potential delinquency.
It Saves You Money on the cost of collecting delinquent accounts. When using the audit approach we will whenever possible utilize a 48-hour Faxed Audit Letter addressed to the President or CFO/CEO of the company or a 7 day Audit Letter. Payments received as a result of this are of course charged to you at rates considerably lower than standard collections and that means your collections cost less.
It Increases The Rate of Collection. It is an accepted fact in the credit industry that older accounts are more difficult and more expensive to collect. Because you are committing overdue accounts for collection at an earlier stage in their life, it gives debtors less time in which to skip, close down or incur further debt all of which can impair their ability to pay you. Accounts placed at 90 –120 days, are historically easier and less expensive to collect and that means your rate of return is higher which in turn puts more money back into your business.
As a last possible resort, if the situation is not resolved, you are consulted before standard collection procedures are initiated.
The Audit Approach provides a unique opportunity to increase your rate of collection and control collection costs without alienating potential sources of future income.