Hi. My name is Terry, and I'm the President of Quicksilver Accounting & Consulting,  Wilmington NC.

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Rev up Receivables

In a tough economy Cash Flow becomes a bright and shiny object you are always looking at.  Personally, I tell all my clients that this is the Number One area they should be spending the most administrative time on.   After all, didn't we each start a company so we would be well paid? Then why don't more companies seem interested in getting their money until they can't pay their own bills?

I believe the number one reason this area is deficient is probably because there is no policy in place.  You need to be very specific about what course your company will take in 15 days, 30 days, 45 days and over.  This could start with a statement sent by email, followed up with a phone call at the next interlude, and maybe a personal visit after 60 days, when possible.

Make sure your clients know your payment schedule upfront. Always put it on your Invoices, and be very consistently in how you go through the steps you have set up for collection.

One thing I absolutely know-  if you will call and actually ask for the payment, you will receive your money before someone who just sends an email.  Which company do you want to be? The receiving company, or the one that has yet to get payment?  Who would you pay first?

If your company is large enough to have an Accounts Receivable person, make sure they know what you will and won't accept, and what their actions should look like.  There is a huge difference between a deadbeat customer, and your best customer that is having a minor problem.  How will they judge the difference. This should have a written procedure they can follow, including oversight.

Make sure your clients value your services and would not want to be without them.  The quickest way to receive your check is to be very forthcoming; that if the bill is not paid by a certain date, all services will stop until the bill is current.  Companies that need you will respond in some capacity.

Make it easy for them to pay you- offer several modes, like automatic debit, credit card, longer payment plans, etc.

Be cautious. Don't let one or two clients be more than 50% of your income. Run a credit report on a regular basis if you have large receivables.  Consider purchasing  receivable insurance if the amounts warrant it.

And if all else fails, make sure you have a good collection agency or legal advisor to work with.  One letter from a lawyer can bring excellent results.

Remember, the best way to have a good ratio  (Accounts Receivable/ Sales) is to have a system in place and stick to it.  Pre qualify your clients if necessary, and be a good partner when one might need a little breathing room for a short time period, something they will remember when good days are ahead.

Economic times are hard. Make sure you response in quick, thoughtful and systemized.


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