Does Your Association Collect What It Should?

Earlier this week, I was talking with a talented association professional who was working diligently with their staff to build revenue. As the leader of the department that brought in the majority of the association's nondues revenue, s/he was alarmed to discover tens of thousands of dollars in receivables had gone uncollected the prior year. When s/he broached the subject with the association's leadership team and CEO, s/he was informed that each department was responsible for creating its own invoices and pursuing the collection of payments. This was the first s/he'd heard of this responsibility. 

Before you dismiss this as an issue that doesn't relate to your association, are you sure? Associations lose millions of dollars a year simply because they don't have proper procedures and accountability measures in place. 

Invoicing

Association policy should specify who is responsible for creating invoices, how they are created, and how and when they are issued. While improvements in software have simplified invoice creation for many association activities, exceptions exist, so workflow needs to be identified for every source of revenue. Allowing department staff to generate invoices outside of the system of record (such as in word processing software) opens the association up to risk and excludes the receivable from routine collection systems that are baked into association management and accounting software systems. 

Define the Process

Association procedures should clearly define the accounts receivable process from invoice creation to collection. Here's an example of what may happen with an event registration:

1. Event staff sets up an event in the registration system, ensuring the system is programmed according to association policies related to chart of accounts, fees, refunds, transfers, invoicing, etc.  
2. The registration system automatically creates invoices and emails them immediately to registrants for the upcoming event. 
3. An event staff team member batch emails invoices for the upcoming by email three days before the event
4. The business office (this could be one person) pulls reports monthly for missing billing contacts, emails, etc., and contacts customers for missing information. 
5. The business office sends all outstanding invoices (association-wide) by email every month.
6. The business office mails invoices that are 30 days past due via US mail. 
7. The business office makes phone calls for accounts that are 60 days past due. 
8. Accounts not collected within six months are referred to a collection service. 

Monitor and Adjust

The association business office (again, this could be a single person) should monitor the accounts receivable aging schedule every month and make recommendations about potential changes needed. Discounts can be offered for early payers. Repeat late payers may be put on a pay-as-you-go basis to reduce the burden on staff. Paper mailing may not be neccesary if electronic collections are working. Associations may need to accept more methods of payment since business processes changed during the pandemic. 

Accounts receivable are like fish - they go bad quickly. Associations that are intentional about issuing and collecting on invoices collect more of the money they've worked so hard to make.