Billing and Collections Best Practices / Edition 1

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By implementing a plethora of best practices, a company can greatly improve the efficiency of its information reporting. Billing and Collections Best Practices shows controllers, accounts receivable managers, accounts payable managers, and CFOs how to implement more than 200 best practices related to every phase of a company's billing and collections activities, including creating credit systems, granting credit, creating and delivering invoices, applying cash receipts, managing the collections department, outsourcing collections work, and using a variety of collection techniques.

One of the first books of its kind to lay out a step-by-step plan on how to implement best practices, Billing and Collections Best Practices itemizes the exact work plans needed to implement each best practice, as well as the common pitfalls that may be encountered along the way. Four-time CFO and bestselling author Steven Bragg also includes a comprehensive list of billing and collections measurements that allow readers to calculate their company's progress along the way.

This go-to resource for billing and collections improvement allows readers to assess their organization's needs and pick the best practices that would provide the most desirable outcome. Designed to benefit people in several parts of a company, Billing and Collections Best Practices provides credit staff with coverage on credit policies, procedures, systems, and credit granting techniques, while supplying the accounting staff with useful chapters covering invoice creation, invoice delivery, and cash application. In addition, the collections staff has access to a number of chapters covering collection systems, outsourcing, and management techniques.

This accessible guide features:

  • Factors that impact a best practices implemen-tation and how to increase a company's odds of success
  • Twenty-two best practices related to the organization of the credit function
  • Thirty-one credit granting best practices
  • Twenty creation of invoices best practices
  • Ten delivery of invoice best practices
  • Eleven cash collection and application best practices
  • Twenty-eight best practices related to the management of the collections department
  • Twenty best practices related to the policies, procedures, training, and supporting systems required to collect overdue funds in an efficient manner
  • Thirty-three collection technique best practices
  • Eleven measurements to assess how the best practices have altered the efficiency and effectiveness of the accounting department
  • Clear graphics indicating the cost and imple- mentation time for each practice
  • An appendix summarizing more than 200 best practices
  • A glossary of billing, credit, and collection terms
  • And much more
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Product Details

  • ISBN-13: 9780471702245
  • Publisher: Wiley
  • Publication date: 12/16/2004
  • Series: Wiley Best Practices Ser.
  • Edition number: 1
  • Pages: 243
  • Product dimensions: 6.14 (w) x 9.21 (h) x 0.63 (d)

Meet the Author

STEVEN M. BRAGG, CPA, CMA, CIA, CPIM, has been the CFO or controller of four companies, as well as a consulting manager at Ernst & Young and auditor at Deloitte & Touche. He received a master's degree from Bentley College, an MBA from Babson College, and a bachelor's degree in economics from the University of Maine. Mr. Bragg resides in Centennial, Colorado. He has written twenty books, including Accounting Best Practices, Accounting Reference Desktop, and Controllership: The Work of the Managerial Accountant, all from Wiley.

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Read an Excerpt

Billing and Collections Best Practices

By Steven M. Bragg

John Wiley & Sons

ISBN: 0-471-70224-2

Chapter One

Success or Failure with Best Practices

This chapter is about implementing best practices. It begins by describing those situations for which best practices are most likely to be installed successfully. The key components of a successful best practice installation are also noted, as well as how to duplicate best practices throughout an organization. When planning to add a best practice, it is also useful to know the ways in which the implementation can fail, so a lengthy list of reasons for failure is provided. Only by carefully considering all of these issues in advance can one hope to achieve a successful best practice implementation that will result in increased levels of efficiency.

Most Fertile Ground for Best Practices

Before installing any best practice, it is useful to review the existing environment to see if the implementation has a reasonable chance to succeed. The following bullet points note the best environments in which best practices can not only be installed, but also have a fair chance of continuing to succeed:

* If benchmarking shows a problem. Some organizations regularly compare their performance levels against those of other companies, especially those with a reputation for having extremely high levels of performance. If the performance levels of these other organizations and the company doing the benchmarking aresignificantly different, this can serve as a reminder that continuous change is necessary in order to survive. If management sees and heeds this warning, the environment in which best practices will be accepted is greatly improved.

* If management has a change orientation. Some managers have a seemingly genetic disposition toward change. If a department has such a person in charge, there will certainly be a drive toward many changes. If anything, this type of person can go too far, implementing too many projects with not enough preparation, resulting in a confused operations group whose newly revised systems may take a considerable amount of time to untangle. The presence of a detail-oriented second-in-command is helpful for preserving order and channeling the energies of such a manager into the most productive directions.

* If the company is experiencing poor financial results. If there is a significant loss, or a trend in that direction, this serves as a wake-up call to management, which in turn results in the creation of a multitude of best practices projects. In this case, the situation may even go too far, with so many improvement projects going on at once that there are not enough resources to go around, resulting in the ultimate completion of few, if any, of the best practices. * If there is new management. Most people who are newly installed as managers want to make changes in order to leave their mark on the organization. Although this can involve less effective best practice items such as organizational changes or a new strategic direction, it is possible that a renewed focus on efficiency will result in the implementation of new best practices.

In short, as long as management is willing to change and has a good reason for doing so, then there is fertile ground for the implementation of a multitude of best practices.

Implementing Best Practices

The implementation of any best practice requires a great deal of careful planning. However, planning is not enough. The implementation process requires several key components in order to ensure a successful conclusion. This section discusses those components.

One of the first implementation steps for all but the simplest best practice improvements is to study and flowchart the existing system about to be improved. By doing so, one can ascertain any unusual requirements that are not readily apparent and that must be included in the planning for the upcoming implementation. Although some reengineering efforts do not spend much time on this task, on the grounds that the entire system is about to be replaced, the same issue still applies; there are usually special requirements, unique to any company that must be addressed in a new system. Accordingly, nearly all implementation projects must include this critical step.

Another issue is the cost-benefit analysis. This is a compilation of all of the costs required to both install and maintain a best practice, which is offset against the benefits of doing so. These costs must include project team payroll and related expenses, outside services, programming costs, training, travel, and capital expenditures. This step is worth a great deal of attention, for a wise manager will not undertake a new project-no matter how cutting edge and high-profile it may be-if a sound analysis is not in place that clearly shows the benefit of moving forward with the project.

Yet another implementation issue is the use of new technology. Although there may be new devices or software on the market that can clearly improve the efficiency of a company's operations, and perhaps even make a demonstrative impact on a company's competitive situation, it still may be more prudent to wait until the technology has been tested in the marketplace for a short time before proceeding with an implementation. This is a particular problem if only one supplier offers the technology, especially if that supplier is a small one or has inadequate funding, with the attendant risk of going out of business. In most cases, the prudent manager will elect to use technology that has proven itself in the marketplace, rather than using the most cutting-edge applications.

Of great importance to most best practice implementations is system testing. Any new application, unless it is astoundingly simple, carries with it the risk of failure. This risk must be tested repeatedly to ensure that it will not occur under actual use. The type of testing can take a variety of forms. One is volume testing, to ensure that a large number of employees using the system at the same time will not result in failure. Another is feature testing, in which sample transactions that test the boundaries of the possible information to be used are run through the system. Yet another possibility is recovery testing-bringing down a computer system suddenly to see how easy it is to restart the system. All of these approaches, or others, depending on the type of best practice, should be completed before unleashing a new application on employees.

One of the last implementation steps before firing up a new best practice is to provide training to employees on how to run the new system. This must be done as late as possible, because employee retention of this information will dwindle rapidly if it is not reinforced by actual practice. In addition, this training should be hands-on whenever possible, because employees retain the most information when training is conducted in this manner. It is important to identify in advance all possible users of a new system for training, because a few untrained employees can result in the failure of a new best practice.

A key element of any training class is procedures. These must be completed, reviewed, and be made available for employee use not only at the time of training, but also at all times thereafter, which requires a good manager to oversee the procedure creation and distribution phases. Procedure writing is a special skill that may require the hiring of technical writers, interviewers, and systems analysts to ensure that procedures are properly crafted. The input of users into the accuracy of all procedures is also an integral step in this process.

Even after the new system has been installed, it is necessary to conduct a postimplementation review. This analysis determines if the cost savings or efficiency improvements are in the expected range, what problems arose during the implementation that should be avoided during future projects, and what issues are still unresolved from the current implementation. This last point is particularly important, for many managers do not follow through completely on all stray implementation issues, which inevitably arise after a new system is put in place. Only by carefully listing these issues and working through them will the employees using the new system be completely satisfied with how a best practice has been installed.

An issue that arises during all phases of a project implementation is communications. Because a wide range of activities may be going on, many of them dependent on each other, it is important that the status of all project steps be continually communicated to the entire project team, as well as all affected employees. By doing so, a project manager can avoid such gaffes as having one task proceed without knowing that, as a result of changes elsewhere in the project, the entire task has been rendered unnecessary. These communications should not just be limited to project plan updates, but should also include all meeting minutes in which changes are decided on, documented, and approved by team leaders. By paying attention to this important item at every step of an implementation, the entire process will be completed much more smoothly.

As described in this section, a successful best practice implementation nearly always includes a review of the current system, a cost-benefit analysis, responsible use of new technology, system testing, training, and a postimplementation review, with a generous dash of communications at every step.

How to Use Best Practices: Best Practice Duplication

It can be a particularly difficult challenge to duplicate a successful best practice when opening a new company facility, especially if expansion is contemplated in many locations over a short time period. The difficulty with best practice duplication is that employees in the new locations are typically given a brief overview of a best practice and told to "go do it." Under this scenario, they have only a sketchy idea of what they are supposed to do, and so create a process that varies in some key details from the baseline situation. To make matters worse, managers at the new location may feel that they can create a better best practice from the start, and so create something that differs in key respects from the baseline. For both reasons, the incidence of best practice duplication failure is high.

To avoid these problems, a company should first be certain that it has accumulated all possible knowledge about a functioning best practice-the forms, policies, procedures, equipment, and special knowledge required to make it work properly-and then transfer this information into a concise document that can be shared with new locations. Second, a roving team of expert users must be commissioned to visit all new company locations and personally install the new systems, thereby ensuring that the proper level of experience with a best practice is brought to bear on a duplication activity. Finally, a company should transfer the practitioners of best practices to new locations on a semipermanent basis to ensure that the necessary knowledge required to make a best practice effective over the long term remains on-site. By taking these steps, a company can increase its odds of spreading best practices throughout all of its locations.

A special issue is the tendency of a new company location to attempt to enhance a copied best practice at the earliest opportunity. This tendency frequently arises from the belief that one can always improve on something that was created elsewhere. However, these changes may negatively impact other parts of the company's systems, resulting in an overall reduction in performance. Consequently, it is better to insist that new locations duplicate a best practice in all respects and use it to match the performance levels of the baseline location before they are allowed to make any changes to it. By doing so, the new location must take the time to fully utilize the best practice and learn its intricacies before modifying it.


Excerpted from Billing and Collections Best Practices by Steven M. Bragg Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents


Chapter 1: Success or Failure with Best Practices.

Chapter 2: Credit Policies, Procedures, and Systems.

Chapter 3: Credit Granting Techniques.

Chapter 4: Invoice Creation.

Chapter 5: Invoice Delivery.

Chapter 6: Cash Collection and Application.

Chapter 7: Managing the Collection Department.

Chapter 8: Collection Systems.

Chapter 9: Collection Techniques.

Chapter 10: Deduction Management.

Chapter 11: Outsourcing Collections.

Chapter 12: Billing and Collections Measurements.

Appendix: Summary of Best Practices.



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