Do you have a policy for AR aging (past due), and how the escalation process should be handled?

We do have several policies in the Collections Manual on the site that can be adapted to your aging protocol. See the AR Collection Policy Templates page on ARO2C.

Each company and industry have different requirements and standard practices. For instance, certain medical firms have a benchmark of keeping their aged AR over 120 days to less than 19% of their total AR. However, for other industries, this benchmark would not be acceptable. Here are some considerations to discuss with your management team.

How do we want to segregate receivables to identify specific collection strategies? For example: we will make personal phone calls to the top 20% of our accounts that make up 80% of our revenue for invoices past due.

For invoices with dollar amounts less than $XXX, we will send out a series of past due collection letters and past due statements.

An escalation process may look something like:

If an invoice over $XXX is past due, it requires a personal call by the collections manager.
If an invoice is over $XXX and is past due 60 days, it requires the involvement of the corporate controller and sales manager.
If an invoice is over $XXX and is past due 90 days, it requires the involvement of the VP of finance and VP of sales.

Since the escalation process is specific to an organization, its industry and general business practices, we have not found one standard practice.

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