By: Jennefer Gutierrez on July 9th, 2020

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How to Reduce Nonpayment Issues: A Logistic Company’s Perspective

Business Advice | Best Practices

Even the most seasoned collections professionals experience issues with nonpayment. At Armstrong Transport Group, we understand that when coupled with a recession caused by a pandemic, the need to collect becomes even greater. Not staying on top of collections will affect an organization's cash flow. The older an invoice gets, the less likely it is the debtor will pay.

Managing your collection efforts will help your organization's cash flow. The sooner you are able to collect, the less time your organization incurs interest charges on loans/lines of credit. It can also prevent a downturn in cash flow, maxing out customers credit limits, borrowing from loans/lines of credit and the inability to pay creditors (including payroll).

This article will explain several best practices to minimize these issues. We will cover what can be done when onboarding the customer, all the way through cash receipt or third-party collection submission.

Onboarding: Proactive Credit Department 

New customer set up and credit analysis occurs daily at logistics companies. Credit departments monitor and approve credit on over thousands of customers annually. Monitoring creditworthiness and staying on top of collections is imperative to the success of logistics companies. 

There are numerous third-party resources available for credit analysis. From insurance agencies like Atradius, Euler Hermes, and Coface, to credit reporting agencies like Equifax, Experian, Ansonia and Dun and Bradstreet, there are numerous ways to stay up-to-date on the market.

Collections Tiers: How to Roll Out a Scalable Collections Department


A best practice for all collections teams is to maintain regular open communication with customers. If payment commitments begin to slip, the best first step is to get on the phone with the customer and learn more. Talking to several different people at the business can help the credit team determine if the story is consistent. The goal is to find out what is really going on with your customer and determine if there is a problem.

At Armstrong, we break down our collections into 4 Tiers. This allows more attention and follow-up to be given to an account the longer it goes unpaid.

By doing so, Armstrong has experienced the following results:

A Breakdown of the Tiers

Tier I (0-30 days past due)

  • Initial reminder calls & emails

  • Resend all overdue invoice copies

  • Follow up calls & emails

  • Resend Open Balance Report

  • Escalated calls & emails to supervisor

Tier II (31-60 days past due)

  • Follow up calls & emails to supervisor

  • Auxiliary research for new contacts

  • Calls & emails to new contacts

  • 1st demand letter & email

    • This demand letter, sent by regular mail, gives the debtor a chance to rectify the situation amicably. In general, these letters demand a specific resolution by a specified deadline, provide justification for the demand or refer to a contract provision, and state what you plan to do if the demand is not met.

Tier III (61-90 days past due)

  • Skip trace investigation

  • Calls & emails to new contacts

  • Customer credit hold

  • Follow up calls & emails to all contacts found

  • 2nd demand letter & email

    • This demand letter, sent by mail (with signed delivery confirmation), provides proof that you made the effort. The intention is to expedite a successful outcome and avoid costly litigation.

Tier IV (91+ days past due)

  • Continued skip trace investigation

  • Persistent calls & emails to all contacts

  • Final Notice/Legal Letter & email

    • This letter, preferably sent from your lawyer or executive via certified mail (with return receipt requested), makes the possibility of a lawsuit “real” for the other company. Perhaps for the first time, the other party will have to weigh the possible consequences of not complying with the demand.

  • Submission of debtor to collections agency

    • File with your AR/credit insurance provider

Third-Party Collection Agencies: Should You Involve Them?

If your organization does not insure your receivables, partner with a third-party collection agency. The ideal collection agency partner will be one that specializes in your industry and will report to the credit bureaus. Collection agencies deploy multiple strategies to retrieve funds, such as:

  • Calling the debtor on multiple lines: office, home, cellphone
  • Mailing numerous late-payment notices to the debtor
  • Contacting other departments within the organization, up to and including the executive team.  
  • Appearing at the business location to demand payment

Other Strategies to Consider

In addition to the above steps, you may want to encourage all customers to pay electronically. Payments made via ACH or wire transfers eliminate the “check is in the mail' excuse. It's easy to track with little to no turnaround time for receipt. Another approach is to waive credit card fees to accommodate business that are working remotely and have limited access to checks. 

Want to Learn More?

Communication is the cornerstone of any good collections effort. From the time a customer gets set up, the tone of the relationship is being set. At Armstrong, we have always used a soft collections approach in conjunction with insuring our receivables. Through these uncertain times, stay connected with your client and offer flexibility when possible. 

Recognized as a 2020 top 25 freight brokerage by Transport Topics, Armstrong has the credibility, established reputation and financial stability your customers and carriers require.