Does your analysis of your business’ financial situation indicate a need to improve your cash flow by speeding up collection on your accounts receivable? If so, we suggest that you implement the following options:
- Establish a better credit policy, so that you make good decisions about extending credit; consider the use of credit cards.
- Tailor your credit policies to different customer groups based on their ability to pay or payment history.
- Develop a more effective way of monitoring your accounts receivable — speeding up slow pays and getting payment on delinquent accounts. Ways to accomplish these goals include: Hiring additional personnel to make calls to slow pays or giving existing employees this responsibility, as well as purchasing computer software that will facilitate the management of your receivables.
- Develop a written policy for how your business will deal with slow-paying customers.
- Require up-front money from those who formerly had credit extended to them.
- Evaluate your terms of credit, indicating the interest rate and penalties you charge, when these charges will start and the type of discount you offer for early payment.
- Require collateral when you extend credit to a customer, so that you can become a secured creditor if that customer develops serious business problems.
- Monitor the industry conditions of your customer groups. Stay attuned to slowdowns and other developments that may affect your customers’ ability to pay on a timely basis, sot hat you can adjust your credit policies accordingly.
- Monitor the financial condition of your individual customers, so that you can anticipate problems and make necessary adjustments.