finance articles businesses business management business marketing Technologies finance accounting Industrial Manufacturing starting a small business Investment health information

What to do when you can't collect on your accounts receivable?

stressedwoman16009389.jpg
One of the major frustrations to running a business can be the collections process.If you have accounts receivables that you cannot collect on then what you have is money you cannot access.Small businesses especially cannot afford to have uncollected accounts receivables and often face the difficulty of collections.However financial experts advise that if you have a clear and concise system of managing your accounts receivables you can avoid many of the pitfalls and problems that lead to collections.

There is nothing more important to the success of your business than your system for managing accounts receivable, billing, and collections. This system is sometimes called a "Collections Management System;" yet whatever it is called, you need to set it up and work it diligently. One of the benefits to having a system is that it lessons the chance of non-payers. The bottom line is this if you have many customers, but no income from these customers; you will go out of business. Here is a list of steps you will need to take to implement a successful collections management system for your business:

  • Establish payment methods from the first day of business.You need to ask yourself: How will people pay you? This will depend primarily on the type of business and whether your customers are individuals or companies or both.It is important that you use established and easy ways to take in money from all of your customers whether it is cash, checks, credit and debit, online payment methods, payment plans or any other external payment source. Keep in mind that the more different types of payments you accept, the more helpful it will be for customers. Keep in mind that you will have to pay a premium for handling some types of payments, such as credit and debit cards.

  • Set up payment processing rules. After you have determined exactly what types of payments to take, you will need to set out some rules for your employees regarding the acceptance and handling of these payment types. For example, what will be your rules for accepting checks? Will you do credit checks on new customers? When will you allow customers to pay over time?Set up clear rules and make sure everyone knows them from all of your employees to every customer.

  • Send out bills. This may seem like a simple step but this is often overlooked in a small company.It is crucial to send out bills to customers who owe you money.You should send a billing at least once a month, or more often if you are really serious about collecting money.This way your customers have a reminder in hand about the money they owe you.Remember the old saying, "Out of sight, out of mind" since this applies to money owed as well.

  • Periodically run an Accounts Receivable Aging Report. Depending on what your type of business is, you may have customers who do not pay when purchasing, or who are paying over time. If you run an accounts receivable aging report it will show you when to send out bills and when to initiate stronger collection methods.These programs are fairly simple and straightforward can come in most software account programs.

  • Do not hesitate to initiate collection proceeding for non-payers.For customers who do not pay you within a reasonable amount of time (as determined by your "rules") you should initiate collections proceedings. You can send an account to a collections agency or to small claims court.You will need to decide which is best for each type of account. While this is not a pleasant part of business this will establish your reputation as a business to be taken seriously and discourage others from trying not to pay their bills.

,
FREE: Get More Leads!
How To Get More LeadsSubscribe to our free newsletter and get our "How To Get More Leads" course free via email. Just enter your first name and email address below to subscribe.
First Name *
Email *


Get More Business Info
Sponsored Links
Recent Articles

Categories

Copyright 2003-2020 by BusinessKnowledgeSource.com - All Rights Reserved
Privacy Policy, Terms of Use