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Collection calls are one of those things that most people do not like to do. If a process is in place to follow up on invoices as they begin to age it is a lot easier for everyone concerned. It is a win-win situation for both the business and the customer. The business wins by having the cash flow for work performed to permit smooth operations in the future; the customer wins because a supplier, who is familiar to them, and with them, is still available to fill future needs. It takes a large amount of time, effort and money to find a new customer or a new supplier; it is much more efficient to make it work with the current one.
Think about the collections before the sale. What this means is that it is important to communicate the credit terms clearly before the sale is made so there is no question as to what the terms are. Is a contract or other written document used to “close” the sale? Are the terms and finance charge policies included? Is there anything that can be done to improve the collection process when the customer is placing an order? Would accepting credit cards improve the collection process?
In QuickBooks there are several alternatives to make this process easier. There is a collection report if a friendly reminder via telephone is desired: “I just wanted to make sure you received the invoice. . . Oh, you did? When can I expect to receive the payment?” There is the ability to create statements that show the history and outstanding balance. In the newer version there is also the ability to e-mail the statement with a personal message. Whatever method is chosen, be consistent and firm. Having a collection policy that the customers know is strictly adhered to works wonders to eliminate the problems before they arise.
Based on the way people buy is there any way to change the packaging of the goods and services to improve cash flow. For example, if a landscaping company has a contract with a homeowner for monthly maintenance, is there a way to offer a discount for payment at the beginning of each quarter rather than monthly? For a pool service, can an annual contract be agreed to for a flat fee with specific guarantees that will be met for the time period? For a computer consultant, can there be some type of preferential scheduling for clients who guarantee a monthly retainer amount? The different variations are endless. Be creative when looking at the business, how and when people buy, and what can be done to shift the cash flow to the earliest possible time.