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Your Small Business Has Overdue Accounts? Try These 5 Tips To Collect

Money owing from customers in the form of accounts receivable is one of the biggest contributors to your company’s cash flow. While business success hinges on having positive cash flow activity, the money that flows into your business can’t really be counted as income until it becomes cash-in-hand.

No company can continue to operate if it consistently pays out more than it takes in, and it’s the ability to generate and use cash that allows your business to:

• Stay on top of its debts
• Enjoy regular growth
• Maintain flexibility in the face of financial emergencies and expansion opportunities
• Get approved for new credit
• Attract additional customers with better credit terms

Lack of integrity aside, there are any number of reasons why a customer might fail to pay their invoices on time:
• smaller companies may be short-staffed and disorganized in their approach to paperwork
• bigger companies may have trouble streamlining their large volume of administrative duties
• companies of all sizes may experience negative cash flow due to a lack of proper budgeting or an inefficiency in collecting their own accounts receivable

Staying current with your invoicing, monitoring the status of your outstanding accounts at least weekly, and knowing when to enlist outside help are just some of the habits that will help to keep your company’s cash flow moving smoothly.

Here are five valuable tips for ramping up the success of your accounts receivable collections:
1. Design and enforce a plan for following up on overdue accounts at regular, pre-established intervals – for example, when invoices are 7 days past due, 15 days past due, 30 days past due, and 45 days past due.

2. Issue an initial reminder letter or email, followed by a phone call – for best results, your follow-up schedule should take advantage of a variety of communication channels, beginning with email, then moving on to telephone and certified letter mail.

3. Offset a failure to collect with alternative payment options – when a valuable client has fallen on temporary hard times, consider offering to take installment payments for an outstanding balance, or to accept a reduced amount as payment in full.

4. Mail out a certified payment demand letter – an official letter from your company’s lawyer threatening legal action will often be enough to encourage a consistently negligent client to prioritize the payment of your invoices. But don’t be afraid to hire a collection agency if all else fails – recovering partial payment for a bill is better than receiving no payment at all.

5. Be persistent, but know when to quit – successful accounts receivable management requires dedication and a willingness to be persistent. Just the same, there may eventually come a point when investing additional time and resources into collecting from a delinquent client is no longer worth the cost.

For more helpful tips for managing your bookkeeping visit: www.DonnaReade.com

If you need answers to your specific questions you can schedule time with me for $75 per hour first time clients and $55 per hour for returning clients.

Click here to Schedule: https://calendly.com/donnareade/client

Feel free to email me at Donna@DonnaReade.com

Let me know you saw my post on 48 days and you will move to the top of my list.

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Group Leader
Comment by Lee Flint on Tuesday
Good suggestion! Coaches are reluctant to ask for payment up front, but it's probably the only way to guarantee a new client pays. Offer a money-back guarantee if you wish, but get that first payment in advance.
Comment by Donna Reade on Monday

Thank you Lee. You are exactly right. Whenever possible get payment or deposits upfront. It helps to determine if the client has other intentions about payment.


Group Leader
Comment by Lee Flint on Monday
Great suggestions for maximizing your collections. This gets to the heart of the matter regarding your customers. You spend a lot of time and money to generate a sale, but if the client won't (or can't) pay, it's a loss. Prospect carefully and minimize your headaches. Thanks again to my favorite 48 Days accountant!
Comment by Donna Reade on January 12, 2017 at 3:53pm

Allan, 

Thank you for asking. 

I first ask them if they are a business or a charity. Then I ask them if they want to stay in business. Then we talk out if they provided the service the client as promised. People do not come to me for any touchy feely help nor do we talk about their relationship with money. They come to me because I specialize in getting past due invoices cleared up and setting up system so that past due invoices become manageable.

Once we determine that they are a business, they want to stay in business and they provided the service to the client as promised then we can move forward. I come at the problem from a numbers point of view. 

Then we figure out a plan of attack to clean up the outstanding invoices, build a way to invoice for services through payment by using available technology, set terms up front with the clients - in other words an invoicing system. So that the business owner can rely on the process instead of getting trapped in their own feelings about money.

What I learn very early on in my working life, if a person can become disciplined enough to build and rely on processes to run their business then they will make money.

www.DonnaReade.com

Comment by Allan Dubon on January 12, 2017 at 7:53am

Donna,
these are some excellent tips. What wold you suggest for the people that have a hard time with the thought of collecting. A lot of my clients have a hard time getting when they first come to me, but it is usually due to some type of incorrect money mindset. What do you council your clients to do to get out of that line of thinking ?

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