A good advice with your accounts by managing your receivables
- By John Schofield
- Published 04/13/2010
- Finances
- Unrated
A good advice with your accounts by managing your receivables
Perhaps the happiest time among businessmen is when they get their profits from their capital which is crucial to the long-term success regardless of the size of the business. However, the sad part is, some businessmen do not pay close attention to their receivables when in fact these are the money that people owed to them and the lifeline of their businesses. When receivables are always late on payments and there are too many delinquent accounts in a business, this can make an impact with the business’ cash flow and damage the company’s liquidity.
If delinquencies cannot be avoided, therefore, there must be the development of an effective collections plan by the management and that is a good advice with your accounts that you should always be aware of. The significance of prompt and accurate collections cannot be underestimated because the longer you let people run away from their payment responsibilities, the harder for the company to collect the receivables. Based from the Commercial Collection Agency Association’s findings, years ago almost 27 % of accounts that are already three months past due are never collected by companies anymore. Today, this figure jumps to 75% and this contributes to the fact that out of five small businesses that have large uncollected receivables go bankrupt due primarily to bad debts.
So how can you develop your own effective collections strategy if the data say there has been a bad practice that has put out small businesses like you have? That can be barely simple nowadays. As a simple advice with your accounts, you can start assessing the effectiveness of you company’s receivable policies. You can gauge the effectiveness of your policies by answering simple questions. Devise questionnaires that have the following:
1.Are you receiving payments from clients within the month after sending out your billing?
2.Is it normal for your accounts to have 2 months past dues?
3.Are you sending bills right after the completions of the project or when the product has been shipped?
4.Are your clients receiving their copy of your payment terms, invoices, purchase order and the like?
5.Is your company following a set of internal procedures about clients who are slow in paying?
6.Is your company performing credit checks on new customers by communicating with credit-rating services?
These are only few of the questions you can devise to analyze everything about your financial problems concerning unpaid receivables. However, you can also devise an effective collection method by enhancing your collections policy with a formal system to ensure that overdue accounts can get paid. As an effective advice with your accounts, use series of letters and phone calls to encourage customers to pay and this is what some businesses do. Take note that these communications must not discourage the person to pay but instead start the communications in a friendly manner and progress it to become serious till you become insistent that payments are overdue and your company needs the money to stay in business.
If delinquencies cannot be avoided, therefore, there must be the development of an effective collections plan by the management and that is a good advice with your accounts that you should always be aware of. The significance of prompt and accurate collections cannot be underestimated because the longer you let people run away from their payment responsibilities, the harder for the company to collect the receivables. Based from the Commercial Collection Agency Association’s findings, years ago almost 27 % of accounts that are already three months past due are never collected by companies anymore. Today, this figure jumps to 75% and this contributes to the fact that out of five small businesses that have large uncollected receivables go bankrupt due primarily to bad debts.
So how can you develop your own effective collections strategy if the data say there has been a bad practice that has put out small businesses like you have? That can be barely simple nowadays. As a simple advice with your accounts, you can start assessing the effectiveness of you company’s receivable policies. You can gauge the effectiveness of your policies by answering simple questions. Devise questionnaires that have the following:
1.Are you receiving payments from clients within the month after sending out your billing?
2.Is it normal for your accounts to have 2 months past dues?
3.Are you sending bills right after the completions of the project or when the product has been shipped?
4.Are your clients receiving their copy of your payment terms, invoices, purchase order and the like?
5.Is your company following a set of internal procedures about clients who are slow in paying?
6.Is your company performing credit checks on new customers by communicating with credit-rating services?
These are only few of the questions you can devise to analyze everything about your financial problems concerning unpaid receivables. However, you can also devise an effective collection method by enhancing your collections policy with a formal system to ensure that overdue accounts can get paid. As an effective advice with your accounts, use series of letters and phone calls to encourage customers to pay and this is what some businesses do. Take note that these communications must not discourage the person to pay but instead start the communications in a friendly manner and progress it to become serious till you become insistent that payments are overdue and your company needs the money to stay in business.
