Everyone has gone home to their families and here I sit in my office looking at the accounts receivable listings and shaking my head. So many customers are past due and I wonder how I can get my customers back on track to paying on time and in full. I have a pile of bills to pay but not enough cash coming in.
I thought I was limiting my credit risk by only allowing friends and people I knew pay later or when they could but it seems as though more and more of those customers are taking their time paying and many are suffering because of the economy. I hate the thought of calling people to ask them for money, so what can I do?
I need new policies and procedures and really need to crack the whip so I can dig myself out of this hole and pull myself up. I start out by making a list of the things I can start doing in the morning to get back on track and get my cash flowing again.
1. Call anyone with a balance over 60 days. Make sure everything is ok, ask what you can do to help them pay the bills on time and get a payment promise today.
2. Send a letter following up on your call – mail it today! It can be short and sweet but must be very specific. Make sure to mention how much will be paid and by what date.
3. FOLLOW UP! If you get a machine, call again AND send a letter.
I leave this list on my accounts receivable clerks desk and make another list of things to do to start limiting my credit risk.
1. Print out or buy Credit Applications (http://www.michelledunn.com/free.html)
2. Put them on a clip board at the front desk and on our website.
3. Have every new customer fill one out.
4. Mail one to every existing customer, with a stamped addressed envelope
5. Check ALL references on any completed applications.
6. Set firm credit limits
7. Set terms for every customer and print them on all invoices and statements
8. Research debt collection education, laws and agencies.
This seems like so much work and I am skeptical that it will even work. Sighing heavily I pull on my coat and shut off the lights. I have a busy day ahead of me tomorrow.
Wow! I am looking at this months aging report and notice many of my past due accounts have been paid! This is so exciting but how did this happen? When I run a report showing last months aging and this months aging I can clearly see that more customers have paid their bills and my bottom line is growing. The steps I took last month that seemed so boring and needless have really paid off. Having enough money to pay my bills and give out bonuses to my employees this month is motivation enough for me to keep working on my credit policies and procedures and keep working on limiting my credit risk.
Business owners everywhere are struggling with how they can get paid when their customers are suffering with job loss, house loss and the rising prices of everything. Something to remember when you are being lenient with customers that are past due is that if someone owes you money, they probably owe others money and whoever takes action first, will get paid first.
Remember, you have to do it! It is like cleaning the bathroom, it must get done. If you don’t want to do it, hire someone to do it for you.
17 tips that will help you to get paid while the economy is suffering and once it recovers:
1. Get paid at the time of service
2. Invoice customers on a regular basis and as soon as the work is complete
3. Make sure your invoices have the due date clearly visible
4. Change your payment terms, if your terms are net 60 or net 45 change them to net 30 or net 15
5. Offer an early payment discount to anyone who pays early, such as 1 or 2% off the bill if they pay within 10 days
6. Act early – when an account reaches 30 days, take action
7. Call big accounts or accounts with large balances 10 days BEFORE the invoice is due to make sure they have the invoice, that they have the correct address to send the check and that there are no problems and that it is scheduled to be paid
8. Be as flexible as you can with payment plans
9. When setting up payment plans remember that you want as much as you can get as frequently as you can get it
10. Be picky about new customers
11. Have a strong contract
12. Run weekly accounts receivable reports and follow up with any accounts that are past due or becoming past due
13. Don’t extend credit blindly
14. If a business owes you money, visit them. If it is a restaurant, go there for lunch, if it is a printing company, get something printed or copied. Every time you walk in they will see you and it reminds them that they owe you money
15. Have the salesperson who made the sale collect the money or with hold their commission until the bill is paid
16. Reduce minimum orders, you could possibly get more orders for less money paid up front
17. Use a collection agency
Doing any or all of these things will help you to get paid more of the money that is owed to you, and cause you less stress. Remember that while the economy is struggling, so are your customers, many who have never had a problem paying their bills before. Make sure to identify which customers have always paid on time and are now having a problem and those that have been late payers and might be trying to milk the system. Taking any or all of these steps will only help you to collect money in the short term but without making changes, such as having a credit policy, or checking credit BEFORE extending credit, you will be right back where you started next month. Be flexible but don’t let yourself get taken advantage of, remember to be firm unless you like working for free. It is up to you, cash flow problems are preventable.
Michelle Dunn is an award winning author and columnist frequently featured in the Wall Street Journal, CNN and Forbes. Visit Michelle online at MichelleDunn.com & Credit-and-Collections.com.