Welcome back to Optimizing Cashflow, I’m David Worrell from Fuse Financial Partners. This is part five, where we talk about problems with your accounts receivable. Every company is going to eventually have a client who doesn’t pay. What you do about it is very important. It’s going to determine whether you ever get any money out of the customer or not.
Let’s talk about the the keys to solving problem accounts receivable. That would be communication, commitment and collections.
When it comes to communication, it everybody’s problem. Everyone in your organization should know that the customer has a problem making a payment. That specifically includes the customer service or sales rep who has the most face-to-face contact. They can often apply subtle pressure to the customer and get them to pay bills that otherwise might continue to be outstanding for quite a while.
Communication also means knowing that you’re talking to the right person at the customer’s organization. Do you have the buy-in from the decision maker who decides to pay your bills or not? Sometimes that’s the CEO. Do you know the name of the person who writes the check, pays the check and Mail’s the check? You need the commitment and communication from all those people.
Commitment also means that you have a commitment for them to make regular payments even if they’re small. Remember, something is better than nothing. If you can get $20, even on a twenty-thousand-dollar debt; if you can get them to pay you $20 on a regular basis, eventually they’re going to whittle it down. I would rather have twenty dollars a day or twenty dollars a week, than nothing and radio silence from the customer. At least they’re trying and you you’re keeping the debt active.
Have you you incurred internal expenses? My favorite example is a sales commission related to the debt that’s unpaid. Your sales guy sold something to the customer, the customer is not making the payments. Have you already paid your sales person a commission? If so, can you claw it back from the salesperson? Because it’s not really earned income. You can’t have sales people selling things that are never collected. Asking for that money back may be a tough conversation. It’s also a lesson the salesperson needs to learn. Protect your cash flow internally as well as externally.
Finally, if you still have a problem collecting an invoice, don’t forget that there are professional collections agents out there to help take care of you. Find a one that you like and trust. Give them a call, send them to the uncollected invoices, tell them what they need to do and set them loose. You might burn your bridge with a customer, I’d rather not have a relationship with a bad customer who’s not going to pay me. Just get it out of your hair, turn it over to a professional to take care of it.
OK, that’s it for collecting bad accounts receivable. My name is David Worrell from Fuse Financial Partners.
Thanks very much for watching our series on optimizing cashflow.