Accounts Receivable

During my early years as BUSGuy the thought of landing big tour accounts was almost as good as catching fish. The adrenaline peaked like setting the hook on a nice striped bass. When fishing season ends, I am left with a freezer full of fillets ready to grill. But when tour season ended, Accounts Receivable were high and cash was short. Then came the collection process, intimidating to say the least. The customer was better at shaking off my hook than I was at filling my cooler. Later I overcame most of this angst and simply demanded prepayment. And the fishing became easier.

Enough of the fishing metaphors. The truth is that all operators need to extend some customer credit. Most student, military and government travel will not proceed without it. This article is not a lesson on extending credit to your customers; it is about the mechanics of managing those credit accounts you already have.

Everyone has some customers who are “slow pays.” How do you manage those accounts receivable? Like all things that are to be managed, regular monitoring and action are important to keep the accounts from getting old, going sour or even bad. Writing off a bad debt is not an expense you want to incur.

Run your accounts receivable aging reports regularly to quickly identify potential delinquencies and begin collection activities. Know how to access your aging schedule. Perhaps your accounts receivable information is in your dispatch software and not in your accounting software. Wherever it is located, it is very important to record all information accurately and timely. By keeping this information current you can monitor who owes money and who might have refundable credits should they cancel their charters.

Be sure the initial invoice goes to the correct person so that it does not sit on the someones desk waiting for attention. Know the customer’s payment procedure and don’t be afraid to follow up early to be sure the process is being carried out correctly. This is your money; be tactful, but do not be shy.

Key steps to monitor and collect accounts receivable include:

Run your aging report. Most programs will allow you to run a report in summary form or in detail. The summary report will allow you to know the total balance owed by each client. The detailed report will identify the amount owed by invoice.
Identify which clients to contact. Look for the largest or oldest amounts first. This will focus your efforts to make sure your efforts receive the greatest yield.
Contact the clients. Some will respond to phone calls; other to emails. . When calling record the date of the call, including “no answer” or “left voice mail.” Sort emails into a collections folder for quick access later. Determine which method of contact works best and set follow dates.
Keep specific notes! Once contact has been made, keep notes on their responses. For example: “the purchase order and invoice have been forwarded to accounting and will take ten days to process.” If payment is not received as noted, follow up with their accounting. Others may tell you that the payment will be sent tomorrow. Follow up.
Should you have continued difficulty getting paid, you may want to contact a supervisor or the owner to get the issue resolved. You may also want to evaluate suspending the client’s credit privileges with your company and require full prepayment instead. If necessary, pursue legal actions. Your software may have an invoice type for delinquencies you can use with your personal email delivery. Consider having email templates your staff can use at various levels of delinquency.
Repeat the process at regular intervals.

Customer Deposits in Accounts Receivable

Many clients are required to make deposits or prepay charters in the weeks or months before a trip is scheduled to run. The deposits and payments may not be earned until the trip has been performed. These amounts represent the company’s liability to the client should the trip not run. Depending on the size of your fleet and your deposit/payment policy, this can be a significant amount. It is important to understand that in most cases that money is not yet yours and may, under certain circumstances, may be refunded. Customer deposits in accounts receivable can reduce the total balance in that account. Knowing how much the credits are can help you determine the amount of money that is ready for collection.

For those who like to use Excel…

It may be helpful to export your accounts receivable report to a spreadsheet program. Spreadsheet programs like Excel can make it easier to monitor money owed for completed trips as well as prepayments for future trips. Once the report is in that format, the data can be sorted to assist in collections activities and to isolate receivables from owed credit amounts. The data sort command will allow you to sort all data by a column of your choice.

Our recommendation is to sort total accounts receivable balance or past due accounts receivable from largest to smallest. This focuses collection activities such as phone calls, emails, etc. on the largest or most problematic of customers. In addition it allows you to easily access individual customer balances. This same spreadsheet can be used to keep the notes we discussed earlier.

As a final thought, if your terms are net 30, do not wait until net 45 to begin the collection process. Start calling at 31. Depending on state regulations, consider applying interest to past due accounts. The credit card in your wallet certainly charges you when you are late one day. When extending credit, do you have a policy prepared for the customer to sign? Possible legal action will be less painful if you do. And think of this, when is the last time your favorite airline let you pay AFTER you landed safely on the ground?

Next month the BUSNerd will feature a how-to-video showing the process turning your accounts receivable report into an Excel spreadsheet. This format will assist your staff in turning your Accounts Receivables into cash. And with more cash in the bank, there is more time for fishing.

Let us at BUSBooks help get your accounting in order! Together we can make YOUR accounting more meaningful.

Written by Tracy Fickett, CPA and Peter Shelbo, Veteran Bus Operator

BUSBooks is a unique CPA accounting firm dedicated to the motorcoach industry.

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