With the economic pressures upon all of us, stretching the dollar is of major consideration. Each of us is reevaluating our budgets, cash flow and accounts receivables. Having worked with clients on how to stretch their dollars and improve their cash flow here are a few suggestions for improving accounts receivables:
Remember you are in business to market your products and services but you are NOT in the business of financing your customers. If you have an outstanding bank loan and are paying interest while your accounts receivables are 60, 90 days or older, you are in reality financing your customers’ business; paying unnecessary interest while (in the majority of the cases) your clients are paying you none.
Consider some of these concepts to increase cash flow from overdue accounts:
* Take credit cards to reduce the number of outstanding accounts. Switch balances from old outstanding accounts to credit cards.
* Eliminate adding any new accounts by taking only credit cards. Credit card fees are less than “carrying an account.”
* Establish a formal collection process.
* Make sure all statements are going out on time and the same time each month.
* If a 30 account is not paid in 45 days call the customer and ask them “when can I expect a check?” Even a partial payment is better than nothing.
* It may be necessary to set up a payment schedule that will bring in cash from each owing customer each month. Train the customer to pay something monthly. The longer a customer delays payments the harder it is to collect.
* If there has been no payment in 60 days repeat the process. There is a tendency for many to remain in “denial” or simply not believe you are serious about payments.
* If no payment has been received or payment arrangements made within 75 days, write a letter that the account will be turned over for collection. Send the letter FEDEX, UPS or certified mail. This will add to the urgency.
* After 90 days turn the account over to a collection agency and let them take it from there. Typical fees are 50% but at least you may still get something.
The old adage, the squeaky wheel gets the oil, applies here. Take action now. Don’t put off the collection process. It works!