Be Active In Managing Your Accounts Receivables
Effective management of your company’s accounts receivables is crucial to maintaining positive cashflow for your business. Failure to manage your accounts receivables could cost you everything!
All companies that are in the position of billing their customers and waiting to be paid have a similar problem. Making sure their customers pay the bill. And sometimes getting them to pay the bill can be harder than getting the job done for them was. On top of everything else you need to balance the objective of getting paid with maintaining your customer relationships.
Accounts receivable are money owed to your company by other companies who have purchased goods or services from you on credit. Realistically maintaining low accounts receivable is a difficult task, and yet plays such a vital role in the overall success of your company. And successfully managingyour accounts receivable can be a great boon to your company while the reverse will probably be true if you neglect them.
There is a great deal to know about collecting overdue accounts. And there really is no right or wrong way to go about it. Because regardless of how big or small your organization may be there is one factor that is more important than anything else you might hear. Consistency is number one. Because if your not consistent then the money won’t always flow in regularly.
Many factors go into people paying their bills late. For one they might not have the money at the moment. But other things that are legitimate do happen. One common cause is the department you do work for does not turn the bill into accounting. Bills often get misplaced which does sound like my dog ate my homework but it’s true. Often accounting departments have their own system that prioritizes who gets paid first. And some make it a standard practice to pay the little guy late. Because they think you need them more than they need you. Larger companies can in many cases be very hard todeal with and if you do business with them regularly that has to be considered. It’s not about asking them to pay you just how you go about doing it. Fortunately, there are some things you can do that can make managing accounts receivable effective, although still not easy or always pleasant.
As I said be consistent. Check your aging reports daily. Even if you have someone responsible for doing the actual collecting you need to be aware of their progress or lack there of on a daily basis. Most people do not like doing collections and consequently they may end up neglecting it. Treat your accounts receivable as a use it or lose it asset, because that is exactly what it is. Accounts receivables do not improve with age. As soon as an account approach’s or exceeds the terms agreed on they need to be contacted. And if at first you don’t succeed in reaching them try again. Every day if necessary until you reach them. Once you get a hold of them be cordial and explain the situation. You’ll often find that the person on the other end of the phone doesn’t know anything about your bill because it was never submitted. So ripping off their head over the phone will do you no good and only cause that person to be unwilling to help you.
When dealing with delinquent accounts you need allies not enemies. Just make sure to document everything. Contact names, phone numbers, contact dates and times. Past due bills and who the bill was originally issued to. Everything that might help collecting on a bill now or in the future needs to be kept.
Put together a comprehensive file on the accounting practices of each company you do business with. You do not want to have to duplicate your work later on another bill. When done well, accounts receivable managementcan make a big difference for any business.
Experience shows that the likelihood of collecting receivables decreases the older they get. A good way to improve cash flow is to make the entire company aware of the importance of accounts receivable, and to make collections. Having your sales staff informed on the status of an account can help as that account is their meal ticket. It behooves them to help collect a bill if their able. Once you’ve developed your receivable collecting practices stick with them.
For most companies, collecting accounts receivable is the largest single headache. No one really likes to do it. But past due accounts receivables can be one of the most damaging drains on your cash flow. And the further you get behind the more you compound the problem. If you haven’t already then it’s time to develop a sound process to track and collect accounts receivable. The life of your business may depend on it.