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Getting more timely CASH from your receivables – Part 2 – Managing collections & planning cash receipts

Jan 10Jeff Matthews

Last week this blog covered the importance of timely and accurate billing to turn your receivables into CASH.

The person who posts your cash to receivables can likely predict the payment patterns of most customers.  Have this person review the open aging at the beginning of each period and prepare a simple spreadsheet showing when open balances for major customers will likely be received.  Use this to set a collection goal by customer for the firm.  Track the receipts by customer in the same manner so you learn the patterns and know who is meeting your collection goals and who may need to be contacted.   Distribute and review the spreadsheet so as the owner, you have an early alert system for collection problems.

Start your collection calling process with a simple courtesy call to the AP person at your customer.   The call should be an inquiry as to when payment can be expected and if there were any issues with the billing.  Allow this call to be made by an employee to their parallel person at the customer’s business.   Do this step a few days prior to your anticipated receipt date, if the customer isn’t easily predictable.  If the customer can be relied upon to pay in a specific manner and you are comfortable with those terms, don’t  bother them.

Post customer payments to your computer system promptly.   Do not allow yourself to be embarrassed by calling for a payment that has already been received.

Send out statements.  Statements allow the customer to affirm that they have all of your invoices.   Statements also serve as another reminder to pay.

Meet with your collection person and/or cash application person regularly, at least every two weeks, always prior to the end of a month, and whenever they need your support to resolve a customer issue.  Provide these employees with an easy avenue of communication with you.  Expect them to know what is going on with the customer accounts.  Expect them to have thought about the customers, to know the customer’s idiosyncrasies and payment habits, and to come to the meeting prepared to offer constructive input.

Next week this blog will address collection calls.

B2B CFO®

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