There is a saying among credit professionals; it really is only a sale once the money can be collected, until then it’s a present and we’re not in the present giving business.
If you are a small business and so are not collecting from your customers in a timely manor you need to re-evaluate your credit/collection practices. Many small business owners are experts in their field but might not feel comfortable about contacting their customers for money that is due.
There is also the particular misunderstanding that a credit /collection expert will stunt company growth simply by denying sales.
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Some fear they will lose customers by having someone ask invoices that are past due. Both are completely false; in fact a credit score professional can actually help to increase sales for your business and improve customer retention.
The collection process needs to be a regular systematic approach. It is much better to be proactive than reactive; when it comes to your money flow for your business.
When you are positive you are calling the customers and uncovering problems early on in the collection procedure. This gives you time to make the required corrections or supply the customer along with additional documentation.
What this will perform is bring in more cash for the business; much quicker than if you sitting around waiting for the customer to send in their payment.
12 Steps To Improving Your Cash Flow
1) Always be professional.
2) Start using a customer service approach, be a problem solver.
3) Run an aging of all customers each month.
4) Be prepared; evaluation the customers’ file before calling them.
5) Know what leverage you have available (is an order ready to ship)
6) Call all customers (once the invoice is 5 days beyond terms).
7) Confirm contact names, numbers and email addresses associated with Accounts
8) Don’t be afraid to ask for the A/P Mgr or Controller to get answers upon past due invoices.
9) Keep Good notes; document everything.
10) Efficient follow up is a key success aspect! Use Outlook to schedule follow up calls or a check promise. (Follow upward calls should be scheduled based on the information you have been told. If you leave a message; call back in a couple of days. )
11) When you do leave a message; also deliver a fax or email with the past due invoice. This will keep your title in front of the customer and increase your likelihood of being paid.
12) Return phone calls promptly, delaying means less money for you.
Implement these steps on a regular basis and you will see an improvement in your cash flow.
For the small company owner who does not want to be bothered calling customers or cannot afford the cost (salary and benefits) of hiring an employee to do this job. You are confronted with a couple of options; keep ignoring the problem and continue struggling with slow cash flow or outsource your credit plus collection function to a professional credit score consultant.
Fact: Cash flow is the cardiovascular of your business; without it your business will soon come to an end.
If you are a small business and are not collecting from the customers in a timely manor; you have to re-evaluate your credit/collection practices. In order to improve your cash flow you must have consistent and effective collection practices in place for the organization.