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Maintain a Consistent
Ebb and
Flow
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Receivables
don’t have much value if they aren’t turned into
cash.
Your company really needs to keep tight control
on its invoices outstanding so you can get an accurate picture of
the receivables situation and take steps to improve the turnover of
those accounts.
Here are five steps that can help you speed
up the collection process and motivate your customers to keep their
payments timely:
1. Conduct
an accounts receivable “aging” on a regular basis, ranked
by the invoice date, not the statement date.
For example,
suppose you ship merchandise with an invoice on the first
of the month. Invoice aging
will correctly show that, by the end of the month, the account is 30
days old. If you age your accounts according to the statement
date, the report will incorrectly show that the account is
current.
Aging gives you not only a better handle on how
long accounts are overdue but also the dollar amount of your
company's receivables outstanding.
2. Regularly reconcile the
accounts receivable ledger with the general ledger.
3. Offer discounts for
prompt payment, and be sure to keep tabs on which
customers receive this incentive. Many companies continue
providing discounts to customers whose payments miss the deadlines
set for the special deals. This hurts cash flow and chips away
at the bottom line.
4. Give customers credit
ratings and distribute those ratings to the appropriate departments
in your company. This includes sales, customer service and data
processing. If you revise a customer’s credit rating, adjust
every department’s records accordingly.
5. Train your sales force to
accelerate collections. For instance, an associate can tactfully
remind an existing customer of an outstanding bill before selling
that customer another product or service. Consider giving your sales
team the leeway to reduce late fees or past-due interest charges in
exchange for payment on the spot.
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