Simple, don’t let them get old!
Well OK, I guess if I don’t have any old receivables I won’t need to know what to do with them, but how do I keep my customers from stretching out the terms of payment?
We are of the belief that cash is king in any small business. Big companies can withstand delayed payments or the bankruptcy of one of their clients that may result in the loss of millions of dollars. Small businesses don’t have that luxury. With small businesses, even a few thousand dollars can often mean the difference between survival and layoffs or closing the doors.
Here are 5 things you can do to help ensure your company doesn’t have any stale receivables:
1. Institute a 90-day cash flow projection that is reviewed and updated daily.
2. Do a credit check on your customers.
3. Ask for vendor references from your customers.
4. Accept payment via credit card.
5. Switch clients to pay by wire transfer vs. physical checks so you don’t have to wait for that “check that’s in the mail!”
The 90-day cash flow projection should become the most important management document in your company. It will give you a 3-month window to see if any “problems” are popping up. Your goal as the owner is to make sure that you have cash in the bank each of those 90 days. Now won’t that help you sleep better at night!?!?