Its your money !!

As we enter 2009, many business owners are a bit fearful about what the economy holds. It is unlikely there will be a bailout for us, and it’s unlikely that the Cape’s economy will thrive like it was a few years ago. We can cower in the corner, shut down all spending, and let our business and our bank accounts shrink. Or we can take control. This is the first in a series of simple tips and ideas for you to take care of your business in these challenging times.

We’ll start with cash, the prize we chase and the Achilles heal of many weak businesses. Many of your customers will not step up and take control like you can; so they may be cash-challenged. And they’ll be later and later in paying your bills. So they threaten to make you cash-challenged, too. What can we do about it?

First of all, if you haven’t already, announce your payment terms for 2009. Put an insert in your first quarter invoices, and update your invoice forms so they clearly spell out your terms. Maybe a 2% discount for payment within 20 days… perhaps a 1% per month penalty for payments beyond 60 days. You decide what works for you, and tell your customers.

Then be much more diligent about collecting your money. Yes, its yours ! You’ve bought the inventory, made the sale, make the delivery, or performed the services. You are entitled to be paid now. So when invoices get to be 20 days old, send a gentle email reminder that payment is due in the next week. After 30 days, make a phone call to politely ask when payment is scheduled. At 45 days, follow up and be a little firmer. At 60 days, you have to be harsh, and at 90 days, you may have to shut off future sales to your customer. Your IT team or support company can help you send these automatic emails and prepare the phone follow up lists automatically if you think there are too many to do by hand.

This may establish a new relationship with your customers. If you have forewarned them and made sure your people have been very polite during the collection process, they will respect you even more. And you’ll have your money. Of course you can make exceptions for special circumstance, but the fewer the better.

If you get excited by this idea, you can even implement tracking statistics so you can see how well it works. Track total receivables to see if its going up or down. You can also track receivables as a percentage of sales. You can measure total receivables or overdue, whatever is best for your business. You can even measure average “days sales outstanding”. Whatever you decide to track, if you pay attention and learn from the experiences it will better, and you’ll have more of your cash, within a few short months.