Anticipate large billings and send the invoices as soon as the
goods are sent. In fact, regard the billing cycle as sacrosanct.
Get your staff to understand that it's the invoices and
statements that pay their wages, and that the sooner they're out
in the market place, the sooner you can get cracking on reeling
in that vital cash flow.
priorities when sending out invoices or doing your telephone
follow-up calls. Go for the biggest amount first. Alternatively,
go for the debtors you feel will respond promptly.
Set firm policies
for collecting bills. Have your bookkeeper call any slow paying
customers the day payment is overdue. Again, training, training,
training in procedures and methods of how to ask for the
discounts for prompt payment. Sure, no one likes to give away a
part of the profits...but sometimes it's best to spend a penny
to reel in a pound.
Ask for up-front
payment of part of the bill. In other words, a retainer. Some
businesses are also in a position to bill on an interim basis.
on delinquent accounts, but check your legal position first. In
some States, the customer might have to agree before to this
Convert to a
"pay-on-invoice-only" system with a rigorous non-relenting
telephone follow-up system. In other words, drop the habit of
sending monthly statements. It only costs money and allows the
customer extra time to pay the debt. Also, drop that crazy
accounting method of reflecting "30/60/90 days overdue". It says
to the market place, "90 day accounts might be acceptable".
billing cycle. Arrange to send orders and invoices before the
end of the month. An invoice dated June 30th will be paid a
month earlier than one dated July 1st.
Sell on closer
terms. For example, require payment in 10 days rather than 30
customers who don't pay promptly. Focus on large customers who
pay on time.
complaints promptly. Often customers withhold payment because of
some minor dissatisfaction.
your accounts receivable account. In other words, factor your
selling to customers who are in financial difficulty. Be
sensitive to those clients who exhibit radical changes in their
buying or payment habits.
or slow-moving inventory that can be converted into cash.
smaller inventory base so that you have less cash tied up in
stock. Naturally, there has to be a trade off between stock
holdings and customer satisfaction.
detailed cash flow statement and monitor it continuously.
Maintain a 14-day
cash flow record that you can keep in your diary (for easy
access). It could look like this
A. Cash at beginning of period $..............
B. Estimated collections for period $..............
C. Total Cash Available (A + B) $..............
D. Major bills to be paid (list them) $..............
E. Wages to be met $..............
F. Any other expenses (list them) $..............
Cash at end (subtract D, E, F, from C) $..............