Tend to the Business of Collecting Your Money
When you're running your business on a shoestring budget, you may find yourself operating in two cycles: one of elation or despair. Project deposits and progress payments can keep your business humming along. However, a few late payers can really slow down your enterprise. You cannot be afraid, timid, or lax when managing your receivables nor when asking for money that is due you. Here are four surefire ways to unclog your payables.
- Invoice sooner rather than later. Don't wait until after a shipment is sent to mail the invoice. Say that an invoice is dated July 14 -- even though the customer may not receive the goods until the 18th or 19th -- and your terms are net 30 days. The accounting department looks at the July 14 date in scheduling payment. Even if the customer pays suppliers on a 45-day cycle, you're already at least three days closer to payment.
- Monitor slow-paying accounts. Many companies have developed sophisticated procedures to stretch out their payables, thus generating loans from their suppliers. You, as a supplier, must respond by establishing a clear-cut collection policy.
- State your payment terms up front. Your payment terms should be discussed as soon as you secure a sale. If the client expresses payment terms different from yours, explain your position and work to reach a compromise. Facilitate the payment process by calling the customer 10 to 15 days before the due date of the first invoice to express appreciation for this business. Ask the customer, "Were there any problems? Since everything's OK, we'll look for your payment by the 15th."
- Follow up on a timely basis. If your terms are net 30, make your first call on day 31, and arrange a definite payment schedule. Cash momentum breaks down between 31 and 60 days. Most people in the category are merely "slow payers." By concentrating your collection efforts here, through letters and by phone, you can accelerate the payment process. You'll be better funded (and happier) when you do.
Copyright © 2000 Kimberly Stansell. All Rights Reserved.