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Improving receivablesMost businesses allow their customers to receive an item and then pay for it 30-60 days later. Since this is a standard procedure, many businesses have cash flow problems because their customers do not pay for the items in a timely manner. If you required payment the moment you sold the products, then cash flow problems would not exist. Proper management of your receivables is necessary to keep your business running effectively. Here are some tips that may help you improve your receivables:
If you still struggle with your receivables, there are some alternative options to try. Many businesses have used factoring companies or a process known as total quality management or TQM. Both processes are designed to improve collections and reduce bad debt. This helps your cash flow because you have more money available now instead of in 60-90 days or longer. Factoring is a process where you will sell off your old invoices for a lower cost. Instead of making 100 percent of the revenue, you will make about 85 percent of the revenue. Normally the invoices you sell will be the older invoices that are hard to collect on. The factoring company will provide you with the money today and they will deal with the collections process to obtain the money they already invested plus their 15 percent. If you do a lot of business or you have larger invoices, factoring is a wise decision because you will be able to collect most of the money instead of losing all of it. TQM is a little different. Instead of simply focusing on receivables alone, it focuses on organizing the entire company to improve efficiency. It is based on putting the customer first and focusing on customer needs before company wants. Implementing TQM can help your company identify the potential problems you are having with receivables and find out some solutions before you lose your business. While TQM does require more time to implement, it will help to resolve your receivables problems and help your entire company run efficiently.
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