Hate collecting your
money? Join the crowd. Recent OPEN Small Business Network Polls from American
Express shows accounts receivables is the top cash flow concern of small business
owners.
However, if you follow
the steps outlined below, you'll be able to keep the cash flowing and avoid
becoming your customers free creditor.
1) Use an invoice format helps you get paid
Does the invoice you're sending out encourage action or inaction? For example,
many invoices are simply marked, "Payable upon receipt". Invoices
so labeled are saying to your customers or clients, "Pay me when it's
convenient for you," instead of "Pay me now." Those inclined
to be slow payers will find the built-in excuse especially convenient; we've
all heard the line "The cheque's in the mail!"
Worse, some invoices have boxes such as "current", "30 days", "60
days", "90 days", and "over 90 days" that broadcast
the aging of the account that's due. Using an invoice that's formatted this way is also broadcasting
to those inclined to be slow payers that you're willing to serve as a creditor;
there's no reason to pay you right away.
Instead of using invoices that encourage inaction, use invoices that encourage
prompt payment. All of the invoices you send out should state a specific
date of payment, such as "Due on November 30, 2001", rather than "Payable
upon receipt", or "Due in 30 days". People are much more
likely to pay attention to a specific payment date, and you eliminate the
possibility of misunderstanding or loose interpretation.
2) Determine whether there is a genuine problem
Research shows that you can improve your collections through the quick resolution
of any problems with the shipment or service provided.
3) Increase the directness of your communications
Don't take it personal if your customers
aren't paying the bills. Explore why the bill is late. It could be your client
simply forgot. Provide a gentle reminder immediately following the due date.
One of the secrets of collection
letter mastery is to gradually increase the assertiveness of the letter over
time. Your first letter is positive and helpful, the third collection
letter may show concern for their situation, and so it builds.
4) Use multiple channels
In today's electronic age, handling
your entire invoicing and collection letter sending by email is simple and
quick. It also can ensure your correspondence is buried in an overstuff inbox
and low priority. Use additional means of sending out your collection letter
correspondence including faxes, phone calls, regular mail, courier, and telegrams.
5) Empower the right people
As a small business owner the
temptation is great to have the sales people handle accounts receivables.
It's better to assign one person to the task and provide proper support,
training, and incentive.
6) Call the heavy hitters
After numerous calls and collection
letter correspondence you'll reach a point where the account is long overdue.
Bring in a collection agency to handle these delinquent clients. Spending
too much time and resources can be draining on your operations.
But remember, there are laws and regulations as to
how companies cancollection agencies can go about collecting debt. Debt collectors
cannot lie to, mislead, or harass your customers. Make sure the collection
agency you select acts responsibly..
7) Run a credit report
Reduce your overdue accounts by
running a credit check on your potential business client before the deal
is done. Expect to spend at least $30 on a Dun & Bradstreet report. D & B
uses self reported data but adds credibility by including: banking data from
company suppliers, bankruptcy filings, media sources, suits, liens, and judgments.
8) Always check references
Any small business planning
to sign a "big deal" would be advised to run trade and bank reference
checks. Simply inquiring with your potential client's or partner's bank can
reveal important banking relationship information and how they have maintained
their accounts.
