There exists a saying among credit professionals; it is only a sale once the money will be collected, until then it’s a present and we’re not in the present giving business.
If you are a small business and are not collecting from your customers inside a timely manor you need to re-evaluate your credit/collection practices. Many small business owners are usually experts in their field but may not feel comfortable about contacting their customers for money that is due.
There is also the particular misunderstanding that a credit /collection professional will stunt company growth by denying sales. Some fear they are going to lose customers by having someone contact invoices that are past due. Both are usually completely false; in fact a credit score professional can actually help to increase sales for your business and improve customer retention.
The collection process needs to be a regular systematic approach. It is much better to become proactive than reactive; when it comes to your money flow for your business.
When you are positive you are calling the customers and uncovering problems early on in the collection procedure. This gives you time to make the required corrections or supply the customer along with additional documentation.
What this will do is bring in more cash for your business; much quicker than if you sat around waiting for the customer to send within their payment.
12 Steps To Improving Your Cash Flow
1) Always be professional.
2) Start using a customer service approach, be a problem solver.
3) Run an aging of all customers each month.
4) Be prepared; evaluation the customers’ file before calling them.
5) Know what leverage available to you (is an order ready to ship)
6) Call all customers (once the invoice is 5 days beyond terms).
7) Confirm get in touch with names, numbers and email addresses of Accounts
8) Don’t be afraid to ask for the A/P Mgr or Controller to get answers upon past due invoices.
9) Keep Good notes; document everything.
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10) Effective follow up is a key success factor! Use Outlook to schedule follow up calls or a check promise. (Follow up calls should be scheduled based on the info you have been told. If you leave a note; call back in a couple of days. )
11) When you do leave a message; also send a fax or email using the past due invoice. This will keep your name in front of the customer and increase your chances of being paid.
12) Return phone calls promptly, delaying means less money to suit your needs.
Implement these steps on a regular basis and you will notice an improvement in your cash flow.
For the small company owner who does not want to be bothered contacting customers or cannot afford the expenditure (salary and benefits) of hiring an employee to do this job. You are faced with a couple of options; keep ignoring the issue and continue struggling with slow cash flow or outsource your credit and collection function to a professional credit consultant.
Fact: Cash flow is the heart of your business; without it your business will soon come to an end.
If you are a small business and are not collecting from your customers in a timely manor; you need to re-evaluate your credit/collection practices. In order to improve your cash flow you must have consistent and effective collection practices in place for the organization.