Wednesday, December 16, 2015

Does Your Business have an Accounts Receivables Problem?

Many businesses suffer due to problems in the way they handle their accounts receivables (AR). If you’ve got a cash flow issue, and you can’t figure out why, there’s a good chance that your AR practices are to blame. Fortunately, these problems are fixable with the right help, and getting your AR processes in order has the power to save your business.   

Of course, you can’t really take the steps to save your business if you’re not aware that it’s in trouble, so be aware of and on the lookout for these common signs of AR issues.

Sign #1: High DSOs

Days sales outstanding (DSO) is a measure of how many days it takes between making a sale and receiving the payment for it. Obviously, businesses with high numbers in the DSO department are businesses that extend a lot of credit...maybe even too much.

Studies show that the longer a business waits to collect on a payment, the higher the risk that it will never receive that payment. Obviously if this happens a lot, your business could wind up in major trouble. If you’re finding that your DSO measures are sky high, it’s time to get some help before your business goes belly up!

Sign #2: You Don’t Have a Clearly Stated Credit Policy

Another sign of trouble is if you don’t have a credit policy at all or if your policy isn’t clear and absolute. You need to have thorough measures in place as to how you will “credit check” those who wish to receive credit from you and as to what standards these customers must meet.
If you’re extending credit to everyone or being wishy-washy about whom you extend credit to, you’re just asking for trouble. If you must extend credit, do so only to deserving clients with a proven history of on-time payments and caught-up accounts.

Sign #3: You’re Reliant on Invoice Factoring
Invoice factoring might sound like an easy way to get more cash flow, but it’s really just a temporary (and dangerous!) quick fix that doesn’t actually fix anything at all. The key to having better cash flow is to better manage your accounts receivables, not to resort to “quick fixes” that do more harm than good!

Sign #4: You Don’t Send Reminders Until Late in the Game
One of the worst things you can do as a business owner is to wait 90 days (or more!) before you send out payment reminders. As mentioned, the longer you wait before attempting to collect, the less likely it is you’ll ever see your money. You need to send a gentle reminder the moment a payment is past due and then more reminders in 30 day increments.

Are you experiencing these dreaded signs of AR failure in your business? If so, don’t delay. Get your AR on track, or you could find your business in serious trouble. #AccountsReceivables #Kinum

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