Accounts receivable is your cash in someone else’s pocket and inventory is cash on a shelf. Cash collected is preferable to any interest bearing bank loan. The only sane method of consistently collecting money is to have someone consistently take on the “role of collector” and rigorously work the files. The benefit of aggressive collecting is less painful than putting up with the stress resulting from inadequate funds to cover your payables and bank line of credit.
Are you following these steps?
- Review how credit is offered by your organization and tighten up your constraints.
- Measure monthly, using traditional methods like “average days outstanding”.
- Research and determine the best client contact (cheque writer, approver, or sender) for the outstanding amount. Develop non- threatening techniques preferably using e-mail.
- Measure and graph your performance and celebrate the improvement. You are aiming to be much better than your industry average.
This simple discipline will help you develop skills that shorten days outstanding and exposure. The skill is to subtly make the payee feel embarrassed that they are late without feeling that you have been heavy handed.