Ok, so that’s not quite right, but you get the point. Actually, “water, water everywhere and not a drop to drink”, comes from a poem about the experiences of a sailor at sea and not from Kevin Costner’s very expensive movie, Water World. Who knew?
The same could be said for a lot entrepreneurs and their money. Their income statement shows that they are doing quite well, but their bank account could be telling a different story. So what’s the deal?
Well it could be that their customers have still not paid them. And the longer this goes on,
The same could be said for a lot entrepreneurs and their money. Their income statement shows that they are doing quite well, but their bank account could be telling a different story. So what’s the deal?
Well it could be that their customers have still not paid them. And the longer this goes on,
the worse it gets. In fact, according to the Commercial Collection Agency Association, the probability
of collecting on a bill drops to 70% after 90 days. And it plummets to 23% after a year.
Below are five easy to implement accounts receivable practices, to keep your bank account in line with your financial statements.
Below are five easy to implement accounts receivable practices, to keep your bank account in line with your financial statements.
- Do not wait to bill your customers - A lot of businesses bill customers monthly, to keep things simple. They offer 30 day terms to their customers. In many cases, customers pay 45 – 60 days after they receive their invoice, and those are the customers that are paying on time. Now consider this, business owners have to pay staff, vendors and taxes on time during the 45 - 60 day lag period.
- Use automatic drafts – You can use an automatic draft from the customer’s bank account through your bank. You can set up payments on a certain date or on a recurring basis. You will incur some costs to get this set up and may even incur costs each time the transaction occurs, however, it may be well worth it in the long run.
- Get paid on the spot – There are several useful tools that will allow you to run a credit card on the spot. Several are now available, reliable, and cost effective.
- Bill payment services - The easier it is for your customer, the quicker you will collect payment.
- Just give them a call - Not an email or snail mail. Simply call them and ask for a specific date you should expect payment in a polite, yet firm manner.
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