Designing a collections process for a professional services firm
Collections work when the follow-up sequence starts before the due date rather than after it, and when standing disputes are cleared first, because a chase applied over an unresolved dispute annoys the one client who has a legitimate reason not to pay. This is an illustrative example of how Salt approaches receivables control, using an Australian consultancy on 30-day terms as the profile.
Scenario — an illustrative example of how Salt approaches this problem. Not a description of a specific client engagement.
The business shape it describes: Australian consultancy, 30-day terms, chronic overruns.
- Scenario covers
- Outsourced collections and receivables control
- Jurisdiction
- Australia
- Sector
- Professional services
- Take an Australian consultancy invoicing on 30-day terms at month end, where chasing happens only when cash gets tight.
- The principal does the chasing personally, dislikes it, and therefore does it late and inconsistently.
- Debtor days running well beyond the stated terms, which means the firm is financing its clients' working capital without having agreed to.
- No structured follow-up sequence. Chasing is ad hoc and driven by the firm's cash position rather than by the age of the invoice.
- Several invoices disputed for reasons never recorded or resolved, sitting in the ledger as debt when they are actually unresolved service questions.
- Invoices issued at month end regardless of when the work was delivered, which adds up to four weeks of delay before the clock even starts.
- Design a follow-up sequence that starts before the due date with a confirmation the invoice was received and is approved for payment, since most late payment is process failure at the client rather than unwillingness.
- Clear the standing disputes first, because a sequence applied over unresolved disputes damages the relationships it touches.
- Move collections off the principal's desk to a systematic weekly cycle run by someone for whom it is not emotionally loaded.
- Move invoicing closer to delivery rather than batching at month end, which removes delay before any chasing is needed.
- Log every dispute with a reason and an owner, so a disputed invoice becomes a service issue with a resolution date rather than an ageing debt.
- Chasing a professional firm's own clients is a relationship job as much as a ledger job. The sequence has to run without the principal, and without clients feeling handed to a debt process.
- Standing disputes have to be cleared first, because applying a follow-up sequence over them just annoys the people who have a legitimate reason not to pay.
- The firm would be able to run collections on a weekly cycle independent of how tight cash is that month.
- Disputes would be visible as service issues with an owner and a resolution date, rather than sitting in the ledger as debt.
- The gap between delivering work and issuing the invoice would close, which is the cheapest improvement available to most professional firms.
What we'd flag
A collections process cannot fix a pricing or scoping problem. Where invoices are consistently disputed for the same reason, the cause is usually in how the work was scoped or communicated, and no follow-up sequence resolves that.
Designing a collections process for a professional services firm
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