Don't Just Sell It, Collect for It

Meet the non-collector, probably a close relative of the low- pricer. To work hard and not make adequate profit is akin to selling hard without having an effective accounts receivable system. 

If you have extraordinary sales ability or have attracted others to your organization who have, congratulations. You're a quantum leap ahead of much of your competition. Or are you? As spoils go to the victor, profit goes to the collector. Unfortunately, the large appetite of the highly productive salesperson usually doesn't extend into the collection phase. 

If you have minimal collection problems with your customers, and I have large problems with mine, is it because you do business with all the good guys and I only the bad? I doubt it. More likely, you have a better receivables system. 

Digging out of such a rut is much harder than avoiding it. Most businesses with a receivables problem aren't aware of it. You're a candidate for account receivables difficulty if: 

1. You send both invoices and statements, creating confusion.
2. You intend to mail statements as close to the first of the month as possible, but "don't get around to it for a few days." 
3. You don't have a write-off list that keeps you informed of what has been written off and for whom. 
4. Your accounting system doesn't provide your financials to you routinely by the 15th of the month. 
5. You continue to sell to accounts that are 60 or more days past due. 
6. You don't post every payment every business day. 
7. Your total receivables over 30 days exceed 15 days' average sales. 
8. You don't employ a collection service for receivables over 120 days. 
9. You don't produce a complete aging list by the 15th of the following month. 
10. You don't have a standard procedure of communicating with late customers beginning no later than 75 days from initial billing. 

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To avoid or overcome a receivables problem, perform the ten items above ritualistically, plus: 

1. Pay your sales staff a commission or incentive, but recapture it when an account reaches 60 days overdue. 
2. When in difficulty, accelerate your receivables report from a 30 day interval to a 15 day interval. 
3. Mail collection requests to overdue accounts in 15 day intervals. 
4. There's nothing magic about billing only at the end of the month. You can also bill weekly or at time of sale if it makes sense. 

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Like many aspects of business, receivables problems often originate because of a lax attitude that trained the customer there was no hurry to pay. One of the necessary steps in cleaning up or avoiding payment problems is to change the customer's expectation. Make it known what your terms are and that you expect them followed. 

Customers don't vary as much from business to business as receivables systems do. Accounts receivable problems are controllable, and when out of control, say more about the seller than the customer. 

Slack accounts receivable management is a cancer that kills businesses. The remedy is internal organization and unfailing discipline.