Designing the Customer Statement

The issue of customer statements are an essential part of the credit control process. They should be issued as close to the beginning of each month. Apart from showing an effective audit trail of transactions, they also present the debtor with a second “reminder” to settle outstanding invoices (in addition to the issue of original invoice).

It should be recognised that some debtor companies will ignore customer statements and simply pass for payment whatever sum is identified as owing and payable according to their own cash management parameters, often rendering a physical statement obsolete.

Others will check statements received but may only make payments when the supplier account is reconciled. This is understandable. From a debtor perspective, account reconciliation allows the payer to uncover errors such as double entry and incorrect amounts that have been keyed in (think of all the incorrect inward payments you have received over the years) but this in no way excuses tardy payment.

Customer statements tend to come in two formats:

A balance forward statement shows the opening balance, the transactions that went through the previous month (debit and credit) and a closing balance.
 
Source: myob.com

An open item statement shows all outstanding transactions for the customer, irrespective of age. One of the advantages of the open item statement is that it makes clear and focuses attention solely on what is owed and the age of the debt.

 
Source: componenetcontrol.com

Statements should have a detachable portion that may be used as a remittance advice that includes the customer account number and details of the outstanding invoices.

All statements should be reviewed by credit control before posting. Necessary checks include address details, transaction details as well as a general sanity check on unusually large transaction amounts.

One of the key purposes of the customer statement is moral suasion, in this respect it can be profitable to split the debt in terms of age i.e. current, 1 month, 2 months, 3 months, 3 months+. It is probably unwise to have any more categories as this can give the impression that debt of 4 months plus is a common occurrence.

Instead, hand written notes or stickers/stamps can be effective persuaders. Some suppliers err in including inappropriate images such as crying individuals on their knees with speech bubbles imploring “Please!”. Introducing any note of levity into the serious business of paying outstanding bills just makes the change to serious enforcement more pronounced.