Being an entrepreneur, you are aware that there are a number of different aspects you need to focus your attention on when it comes to successfully operating your business. These include generating enough sales, taking necessary steps to minimize operating costs, hiring proficient employees and effectively managing your entire workforce. However, proper collection of accounts receivable is one important area most proprietors often ignore. This neglect has the potential of ruining their business in the long-run. Until they take adequate steps to ensure their clients the money due to them for the sales they make, these businessmen could face a severe cash crunch.
Alton Ingram – Ways to improve your organization’s accounts receivable
Alton Ingram is a prominent cosmetic surgeon from Nashville in Tennessee with valuable years of experience under his belt in this medical field. He specializes in the field of reconstructive surgery and is a member of the American Medical Association. He says it is possible for entrepreneurs of small business establishments to improve their accounts receivable position by keeping in mind the following 4 factors:
- Make accounts receivable aging report
The first step you need to take to improve your establishments’ collection is the determine the present payment status of all your customers. For this, you need to prepare an accounts receivable aging report to assess how prompt your clients are in paying the amounts they owe for products or service you sell them. This enables to determine late paying debtors and other visible collection issues.
- Take proactive measures to improve invoicing
The invoices you send to your customers after successfully selling the products they need have to be clear. Such statements should contain all the information they need to know about the description of products or services you sold them, the date of such sales and the amount they have to pay. You also need to specify your terms of payment in such documents. This goes a long way prevent disputes from arising when you start sending them reminders before due dates of such payments.
- Act promptly on slow-paying customers
Research show businesses who face the problem of slow-paying customers find their receivables remain either partially or uncollected at the end of accounting period. To prevent such a situation from occurring you need to take effective steps to reminder your clients of the amounts they owe you before the due dates of the invoices you issue them. Even after the expiry of such dates, it is important for you to inform them of the amount they owe you. In the worst-case scenario, you could impose severe penalties.
- Consider offering discounts as an incentive for early payments
You could consider offer your clients a cash discounts as an incentive for making early payments on the amounts they owe your business. Taking such a step will result in an increase your selling and distribution expenses. However, the subsequent increase in cash flow will make such a move worthwhile.
Alton Ingram says managing your organization’s accounts receivable is critical to its success in the market. Taking the above 4 factors into consideration can go a long way in helping you achieve this objective. After all, profits are useless if your organization does not have adequate cash to conduct its operations.