At the outset you must record all payments received on a daily basis, remembering to record the name as it appears on the cheque and photocopying all cheques received and filing them daily with your remittance advices. Every cheque should be posted to the correct customer account first thing every morning, and correctly allocated to the invoices it is paying.
Having full confidence that the balance on the account is always correct is an important element for your collection process.
Any reconciliation items should be actioned straight away:
If an invoice was omitted from the payment, a call should be made to the customer, thanking them for their cheque and finding out why that invoice or invoices weren’t paid. Either they are not due to be paid so a credit should be issued or they are missing a copy of the invoice or it wasn’t approved, in either case you should take appropriate action and ask for an additional cheque to clear the account straight away.
If an invoice was short paid, again a call should be made and the reasons established and corrective action taken on the day in line with the instructions above.
It is a good idea to complete these exercises on the day the cheque is received, any delay will constitute acceptance and you will find it will get pushed further down your priority list.
If you send a bill for one amount and the customer pays a lesser amount, this is a problem and we all know the longer problems are left the bigger they become. For example if the short payment is because they think they have been overcharged, and you lodge the cheque and put it on their account, they will take that as confirmation that the price they have on their system is correct and expect all future invoices to be at the lower price, the longer this is allowed to continue the greater the exposure to you. If you are billing at one price, your sales reports and profit reports are overstated if the customer will not agree with the prices charged.
You should reconcile your cash book with your bank statements every single day. You should check your bank account for direct payments and returned cheques and direct debits.
In all cases the investigations and solutions should be completed on the day the payment is received or returned, the longer you allow them to sit there unresolved the worse it will be for you in the end.
Finally on the topic of cash controls, if you have cash on delivery in your business you have to make absolutely sure that there are no exceptions – ever. Cash should be checked daily and reports run to make sure every single cent is collected, posted and allocated every single day. The only policy that works with cash is a zero tolerance and that means collecting every single cent, if you build in any tolerance levels they will be stretched over time: “it’s only .50c”, “it’s only €2.57”, “it’s only €23.78”….and so on.
If you are trusting your staff members to handle cash on your behalf, you owe it to all concerned to have watertight systems that will miss a single euro within 24 hours, anything less and you are asking for trouble.