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Cash Flow and Collections!
Managing your cash is the most important factor in
maintaining your business. Managing your incoming outlay and
outgoing outlay can leave you facing what many large
organization are facing.
Some controllers for large organizations get paid $200,000 a
year to do just that. I guess some of them working for AIG
were over paid!!
What do you need to do to make sure you can keep your
business going in the economic down times. How long can you
survive without cash inflow?
These are real important questions and many small
organizations do you have these answers.
Why do organization do not know the answer to these
questions? To know the answer to these questions, you will
need to anticipate customer behavior. Know patterns and
trends. Patterns and trends are true for both sales and
collections of those sales.
Some companies are great in getting customer's business, yet
have issues collecting. We all know that if you can not
collect on a sale is better than the no sale. You are better
off on passing on customers that will not pay or pay late
than to take their business.
Most large organizations factor in cost of collections into
their product pricing. Credit card companies charge everyone
24-28 percent so that they will make up for small percentage
that default on their credit cards. However, small
businesses cannot do that and be competitive.
What do I do?
Plan your business on good data. With technology today, you
have tools to see customers trends for payment, collections.
Look at where your sales are and how they payment behavior
is.
I
have been in businesses small from 5 to 50 million dollars
and many do not track activities by customer types and
territories.
Some do track sales by territory, yet do not analyze those
customers payment behavior.
Arm yourself with important data that will save your
business. Know where you are making profit. Again is not
just sales, it is profit that will keep you going. So to
know if you are making profit you need to know what you
sold, what it gross cost to you and after that how much do
you spend to receive that revenue in.
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Collection is science you need to follow many steps.
Stay in front
of your customers:
Customers need to know that you
are in front of them if they are late. Send communication as
soon as they are past due. Make sure you are training your
customers. You know that your customer maybe the same mortgage
company that does not feel bad charging you late charges when
you are only 1 day late. Why should you give them that curtsey.
You must
communicate:
Make sure you will send
reminders, emails, and call when needed. However you need to
streamline the process so it does not take two or three staff to
do. Keep communication safe. You never know when it will help
you collecting on few that are real problem. .
Know what
actions to take:
You need to be informed and take
actions as needed. This could mean a call, letter or just short
note. Only way you know that is if you have all the information.
It is important all documentation is accurate.
Be Organized:
Who will win the argument, the
person who is organized and can demonstrate that the have their
ducks in the row. Be organized and have your accounts
receivables in central place including their documents.
Document:
This is most important factor in
your business. This is not only true in the collection of your
accounts receivable, but also in all aspects of your business.
From the quote process to the end of the collections. When
customers know you are well documented they will look at your
business in a different light.
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