You probably know how frustrating it can be when your clients don’t pay their dues on time. It can have adverse effect on your business’ overall cashflow position and disrupt your market operations. After all, the money you receive from them enables you to meet your overhead costs. These include various operating expenses, payments to your suppliers and remuneration to your staff. Research shows that many entrepreneurs file for bankruptcy because their organizations face a cash crunch. You don’t want to find yourself in such a situation. This is the reason why you should pay more attention to your organization’s accounts receivable.
Peter Zieve – How to streamline your organization’s accounts receivable?
Peter Zieve is the Chief Executive Officer and founder of Electroimpact, Inc. This organization specializes in the automation of aircraft parts and space exploration equipment. Experts within the aviation industry say it ranks among the premier engineering companies in America. It has set the benchmark for other similar establishments to follow. This is the reason why it is the first choice among graduates who want to excel in this field. This corporate enterprise is also well-known for its philanthropic services to the local community in Mukilteo, Washington. In fact, Dr. Zieve has the honor of being the inventor of the Low Voltage Electromagnetic Riveting technology. Today, he running for public office in the hope of becoming the elected representative of the people in this region.
He points out that young entrepreneurs need to take a proactive approach towards accounts receivables. You should be doing the same thing if you want to ensure the success of your business. This goes a long way in resolving your organization’s cashflow issues. He suggests that you should implement the following 3 important measures:
- Prepare an accounts receivable (A/R) aging report
Your first job is to determine the present payment status of all your customers. For this, you need to prepare a comprehensive accounts receivable (A/R) aging report. You need to break it down into the number of days their dues remaining outstanding from the date of issue of their invoices. This will give an idea of how long it takes for money to flow into your business. You will also be able to identify the main defaulters among your clients.
- Streamline your invoicing mechanism
You need to take adequate steps to streamline your organization’s invoicing system. Such documents have to contain all the relevant information, lucid and be unambiguous. It should state clearly the description of the items, the price per unit, total sales value, tax payable and payment terms. This leaves no room for disputes at a later stage. As soon as your business makes a sale, your customers should receive such a document.
- Offer incentives and introduce penalties for offenders
To encourage your customers to pay their dues promptly, you can introduce a system of cash discounts. If they make their payments within a certain timeframe, they can avail such incentives. However, you allot one of your staff members to take of reminding them few days before their dues are payable. You should also impose harsh penalties on clients who frequently default in paying their dues on time. Otherwise, you will never receive the money they owe you.
Entrepreneurs need to remember that accounts receivable is just as important as generating sales. Peter Zieve says they need to ensure money flows into their businesses. Implement the above 3 measures can help them to achieve this objective.