Most startup entrepreneurs are aware that running a successful business organization is never easy. There are so many different aspects which require their attention. Generating adequate sales revenue is generally at the top of their agenda. They assume this is the only way they are going to increase their bottom-line profits. However, there is one very important area which they tend to overlook at their peril. This is account receivable collection. These businessmen need to realize that without adequate funds conducting their market operations is a tall order. In the worst-case scenario, their organizations run the risk of going into bankruptcy.
How can entrepreneurs improve their account receivable collections?
Larry Polhill is one of America’s most prominent and popular financial consultants. Very few people specializing in this field have been able to reach his level of success. He has over 25 years of valuable experience under his belt. He is an expert in areas as diverse as acquisition, corporate mergers and business finance During this illustrious career; he has been responsible for turning the fortunes of many loss-making businesses. These include Photocircuits Corporation, American Pacific Financial Corp., Capital Foods, LLC and Cafe Valley, Inc. In almost all of these organizations, he has held the positions of President, Chairman, Chief Executive Officer, and Director.
This financial expert explains many startup entrepreneurs may find they have slow-paying customers in their clientele. They need to send constant reminders to these individuals to clear their dues immediately. This takes up most of their time and energy. Moreover, these businessmen are reluctant to take legal action against them for obvious reasons. This makes them feel helpless. He suggests they should implement to following 3 important tips to improve their account receivable position:
- Formulate an aging report
Startup entrepreneurs first need to determine the current payment status of all their customers. They got to find out who their slow-paying clients are. Only then can they take necessary action against them. This implies imposing adequate penalties on them to ensure their change their habits. However, these businessmen can only take this step when they prepare an appropriate aging report.
- Streamline their invoicing process
This is perhaps the most important step these entrepreneurs need to do. As soon as they make successful sales, they arise necessary invoices on their clients. These documents should contain all the necessary details in unambiguous terms. These include products sold, their description, their price per unit and total sales value.
Moreover, these proprietors should clearly state their terms of payment on such paperwork. Such bills soon reach their customers as soon as possible. If the need arises, they send them electronically.
- Offer cash discounts of early payments
These entrepreneurs should introduce an incentive scheme. They should offer special cash discounts to customers who clear their dues promptly. This goes a long way to ensure these businessmen get the cash they need on time.
In the opinion of financial consultant Larry Polhill, startup entrepreneurs need to realize the proper importance account receivable collection. It is essential to the success of their business as it eases the pressure on cash flow position. In the process, they get the money they need to conduct their market operation. Adopting the above 3 important steps can help them achieve this objective.