“Beware of little expenses. A small leak will sink a great ship.”
– Benjamin Franklin via brainyquote.com
This week we are researching and writing about cash flow management. Each person in my entrepreneurial finance class has taken a cash flow topic and writing about it for the benefit of our other classmates. I chose the topic of “how to collect cash owed to your company”. Collecting cash owed to your company can be a hard task to manage. The easy solution might be to say, “why not require payment in full before products or services are delivered?” Unfortunately for many industries and businesses, cash payment up-front is simply not how business is conducted. It might be an issue of convenience, corporate billing structure, or needing to deliver upon a service before being paid in full. For many entrepreneurs, collecting cash owed has to be an integral part of daily, and at least monthly, operations.
The first step to ensuring proper and timely collection of payment is an accurate and proactive accounts receivable system. If an entrepreneur anticipates needing to bill customers for products or services rather than or in addition to point of sale transactions. Entrepreneurs should invest in a record keeping or point of sale system with built-in billing/monthly statement generation capabilities.
While I used several resources for the full report, I wanted to share a great article that I found about collecting money owed to your business. As usual, Entrepreneur magazine (and electronic content) published this great piece from John Rampton in 2017 called 6 Strategies for Dealing With Unpaid Invoices That Get You Paid Sooner.
Here are the 6 tactics:
- Make sure you followed procedure and then follow-up politely.
- Give discounts and charge a penalty.
- Abandon the stiff business approach.
- Collections, arbitration, mediation, court.
- Contact a Business Reporting Bureau.
- Factor them.
Make sure you click on the article for the details and some other great links to resources and definitions of some of the terms. I had never heard of “factoring” debt until I read this article.
Rampton, J. (2017). 6 Strategies for Dealing With Unpaid Invoices That Get You Paid Sooner. Retrieved from https://www.entrepreneur.com/article/302037