Small-Business

If you are a small-business and are not collecting from your customers in a timely manor you need to re-evaluate your collection practices. Many small-business owners are experts in their field but may not feel comfortable about contacting their customers for money that is due.

Often small-business do not feel they have a need or possibly the funding available for a person to collect on past due accounts and manage their credit risk. It is quite common for small business owners to extend credit to another business simply on a handshake. This is wrong and should not be done as it can lead to big time headaches when the customer does not pay.

There is also the misunderstanding that a credit /collection professional will stunt company growth by denying sales or the fear they will lose customers by having someone call on invoices that are past due. Both are completely false in fact a credit professional can actually help to increase sales and improve customer retention.
 

So, with that said where do you start; here are two key elements you should establish in your small-business credit and collection practices.

1. Establish a written policy outlining the company’s philosophy on credit
2. Develop a written procedures manual so everyone knows how to handle a particular situation when they arise.

These two elements will develop consistency within your organization and empower your people.

The collection process needs to be a consistent systematic approach. It is much better to be proactive than reactive. 

When you are proactive you are calling the customers and uncovering problems early on in the collection process. This gives you time to make the necessary corrections or supply the customer with additional documentation. 

What this will do is bring in more cash much quicker than if you sat around waiting for the customer to send in the payment.

 
Here is a brief outline on the collection steps to follow for improving your cash flow.

•  Always be professional

•  Utilize a customer service approach, be a problem solver

•  Run an aging of all customers

•  Be prepared; review the customers’ file before calling

•  Know what leverage you have available (is an order ready to ship)  Call all customers (I call everyone, once the invoice is 5 days past terms,)

• Get the contact names, numbers and email addresses of Accounts Payable

• Don’t be afraid to ask for the A/P Mgr or Controller to get answers

•  Keep Good notes of what the customers tell you; document everything either on the computer and/or in a hard file

• Use Outlook or a day planner to note follow up calls or a check promise (Follow up calls are scheduled based on the information you have been told. If you leave a message, call back in a couple of days depending on circumstances. )

• Return calls promptly, delaying means $$$$

Implement these steps on a regular basis and you will see an improvement in your cash flow.

If you are a small business owner and do not want to be bothered calling customers and cannot afford to hire someone to do this job. You are faced with a couple of options keep ignoring the problem and continue struggling with slow cash flow or outsource it.

Cash flow is the heart of the business without it your business will soon come to an end.

In order to improve your small-business cash flow you must have consistent and effective collection practices in place for your organization. A credit professional can improve your cash flow, reduce your risk and find new ways to increase your sales.