It looks like the economy is finally picking up as overall sales are slowly increasing, but businesses might not be completely out of the woods yet. According to a recent article we came across over at the Open Forum, though businesses can stop worrying as much about their sales numbers, they should keep a close eye on their accounts receivables. Customers are taking much longer to actually fork over payment, which translates to high Days Sales Outstanding (DSO) numbers and low cash flow. Reducing this number can play a big factor in overall business financial health and success.
Here are some tips to help you get your money faster:
Enforce it. Set a strict deadline for payment and actually stick to it. Train your sales staff on what the deadline is and make sure they know that this is serious.
Have standards. Don’t just do business with any Tom, Dick, or Harry that walks through your doors. Be sure that your customers are credit worthy and have them undergo a credit evaluation before you hand over your precious goods.
Have a process. Have a set plan in place of how your company collects payment. If you don’t have one already, it may be worthwhile to hire an accounts receivable staff member that can solely focus on collecting payment. You may be surprised at the impact being able to provide direct (and regular) contact with your customers will have on your receivables.
Set expectations. Though strict deadlines are key for most businesses, small businesses may have to be willing to be a little bit flexible. Knowing when to push your deadline back a week or two and being more willing to work with your customers may mean that you’ll get paid first, before their other debts.
Work with a financial company. Offering financing to your customers through a financial partner, like Direct Capital, will take the accounts receivable worries entirely out of your hands. You’ll be able to focus on selling, while the financial company can worry about making sure you get paid.
Cash will always be king when it comes to business, and getting paid quicker by your customers is a sure fire way to get more cash back into your business.
How do you handle slow payments?