Receivables aren’t really useful if they aren’t turned into cash.
Your Maine-based small business really needs to keep tight control of its outstanding invoices so you are fully aware of the receivables situation and can take steps to improve the turnover of those accounts.
Here are five steps that can help you speed up the collection process and motivate your customers to keep their payments timely:
- Conduct an accounts receivable aging report on a regular basis. Make sure it is ranked by the invoice date, not the statement date. Aging gives you not only a better handle on how long accounts are overdue but also the dollar amount of your company’s receivables outstanding.
- Regularly reconcile the accounts receivable ledger with the general ledger.
- Offer discounts for prompt payment, and be sure to pay attention to which customers receive this incentive. Don’t continue to offer discounts to customers who miss the payment deadline. This hurts cash flow and chips away at the bottom line.
- Give customers credit ratings and distribute those ratings to the appropriate departments in your company. If you make a change to a customer’s credit rating, adjust all department’s records accordingly.
- Train your sales force to accelerate collections. An associate can tactfully remind an existing customer of an outstanding bill before selling that customer another product or service. You always want to maintain a positive future relationship with your small business’ customers, so consider giving your sales team the leeway to reduce late fees or past-due interest charges in exchange for payment on the spot, and remind them to always be fair, consistent, and polite.
For future sales, you may need to take steps to change the way customers pay. If you are selling products, you may need to require a deposit at the time of delivery to help keep your cash flowing. In the worst case, it may be necessary to demand full payment on delivery. If you are selling services, ask for progress payments according to a written contract.
Consult with Filler & Associates for more information about how to keep your accounts receivable turned into cash for your business.