Increasing Your Accounts Receivable
Vistage International speaker Abe Sanchez shares strategy on managing accounts receivable
SAN DIEGO (Nov. 6, 2008) — During an economic downturn, collecting on accounts receivable becomes more important than ever. At the same time, it also becomes more difficult as your customers begin to experience cash flow crunches. Vistage speaker Abe Sanchez believes that collecting accounts receivable in a timely manner isn't just about the money. It affects your reputation and your all-important market share.
"It's critically important to manage accounts receivable because collections lead to repeat sales" Sanchez explains. "You can't afford to lose customers during tough times, and one way to keep them is by making sure they stay current on their account with you.”
Strategies for improving your collections rate:
- Start early. Contact all delinquent accounts within three to five days of becoming overdue. Waiting 60 or 90 days has a strong negative effect on cash flow. Plus, banks are not going to lend money against those receivables.
- Call the largest accounts first. Most companies call their delinquent accounts in alphabetical order. However, 20 percent of your accounts usually represent 80 percent of the dollars. Forget about the alphabet, go after the customers that owe you the most money, then work your way down to the smaller accounts.
- Keep a systems log to track process problems. Not only does this make it easier to collect your money, it also allows you to constantly upgrade your business processes and become more efficient.
- Call at the right time. The best time to call commercial accounts is on Monday morning. Start calling personal customers on Thursday and go through Friday, when people usually get paid.
- Get the right person for the job. Most companies hire accountant-types to handle collections. Unfortunately, those types tend to prefer holing up in their cubicles and working with numbers rather than people. Instead, hire outgoing people who enjoy interacting with others and talking on the phone.
- Closing the sale. Contact the decision-maker, determine the type of customer, make your presentation based on the type, and close the "sale" and follow up. Get a firm commitment from the customer on when they will pay you and use a good contact management system to track.
For information on executive coaching organization Vistage International, visit http://www.vistage.com/about-us.html.
Contact: Lois Arbogast, Vistage International 858.509.5861