Ten Steps to Increase Your Cash Flow
When a business sells a good or provides a service, it has a right to be paid in a timely manner.
Moreover, in today’s fast-paced environment, effective credit and collection policies can make the difference between being paid and not being paid.
The following 10 tips will help your organization maximize its cashflow, while diminishing its slow-pay or non-pay accounts.
Step One: Have a Clear and Concise Credit Policy
One of the unforeseen reasons for a slow-pay or worse yet an account that does not pay at all is that the business has not defined to its customers (and employees) the company’s credit policies.
Confusion often leads to inaction on the part of your customer. In addition, inaction means that you are not paid in a timely fashion.
Make sure that the payment schedule, payment date, and penalties for late or non-payment is clearly stated in your contract. You may even require the customer to initial the contract next to each of these important sections. In addition, always give the customer a copy of their contract for future review.
Step Two: Properly Trained Employees Can Make the Difference
Make sure that each employee understands the importance of consistent collection of your accounts receivables. After all, the company depends on the timely payment of all accounts receivable to survive.
Make sure that your employees explain your policies clearly to the customer during the purchase process, just skipping through the main sections of the contract will not suffice.
Step Three: Invoice Promptly and Accurately
One of the most difficult things for a small business is to keep on top of accounts receivables. If you do not have a dependable invoicing and billing system, you will fall behind. Most of the time the only reason a customer has not paid is that they have not received a bill.
Step Four: Contact Customer Promptly Following Late or Non-Payment.
Research has shown that the longer you wait to contact a delinquent account, the less likely you are to collect it at all.
Try to contact past due accounts within 10 days, and on a weekly basis thereafter.
The bottom line is this: If you are not being paid, someone else is. Make sure that that “someone” is you by calling often, in a polite, professional manner.
Step Five: Be Precise in What You Expect from the Customer
Never leave a contact open ended, such as, “We’ll talk next week” or, “I’ll send what I can.” Every contact that you make should result in a specific commitment for payment. Push for a date that you can expect payment
Step Six: Control the Conversation
Even the most experienced employee can sometimes let emotion get in the way when dealing with delinquent customers. Do not let customers sidetrack you with excuses. Remember, the object of the call is to collect the money that they owe you. Be firm, yet courteous when dealing with them. Above all, do not feel guilty for askin for your money.
Step Seven: Be Flexible
Be ready to adjust to the situation. The best solution in a given situation may be a new payment plan. Be prepared to accept a reasonable payment schedule, and willing to work with a customer’s circumstances. Remember that what may work for one customer may not work with the next.
Step Eight: Keep Accurate Records
Keep detailed notes of every contact you have with the customer. Accurate records will help with the next time a call is placed to your customer. In addition, it may become important if you need to take your customer to court.
Step Nine: Follow All Collection Laws
Each state has different collection laws, so make sure that you check with your state or local regulatory authorities to see what laws may apply to your company with regard to the collection of delinquent debts. In many states, businesses are governed by the same collection laws as collection agencies. For example, calling customers at an odd hour or disclosing personal information to a third-party can cause you serious repercussions. Always remember that the customer has rights, and make sure that you never violate them.
Step Ten: Use a Third-Party to Collect Past-Due Debt
After 90 days, the success of in-house collections drops by 80%. If your customer still has not paid after 90 days, your best option is to turn those accounts over to a collection agency. A third-party can motivate the customer to pay in ways that you cannot.
At Southwest Recovery Services, we are committed to helping you collect on your delinquent accounts and keeping your cash-flow, flowing.