Accounts Receivable: How to Tame the Beast

You don't want to wrestle with Your accounts receivables - You just want to tame them.

If you take steps to manage your receivables by applying the right kind of pressure at the right time, the beast can be tamed. Following are seven steps:

The First Rule: Those who expect to get paid - get paid
In the administration and control of receivables, attitude counts. We've discovered that if you expect to get paid, and the other party knows it, and knows you'll take action if you are not paid, you will get paid.
It's simple: If you take it seriously, they'll take it seriously. On the other hand, if you treat receivables lightly, and allow your customers to take advantage of you, they will. What does "taking it seriously," mean? It means:

• Establishing policies and procedures that will help you make decisions as and easier.
• Making a commitment to properly train yourself and your employees in how to manage and collect receivables.
• Being certain your customers understand your terms and intentions.
• Understanding and using the tools and services that are available to you.

The Second Rule: Do Something Every Twenty Days
Nothing is more effective than a systematic, controlled approach to receivable management. Step-by-step procedures are the key:

We have had great results with a process we call the "Twenty Day Diary." Here's how it works:

• Day one, you make a sale, deliver products, and issue an invoice with terms set at NET 30 days.
• Twenty days later - ten days before the receivable is due - you call the customer. This is a pre-collection call that doubles as a service call.
• You ask if the order was received, if everything was satisfactory, if they have the invoice, and if they understand the terms.
• If there is a problem, you have a chance to fix it before the due date, and everybody is happy. If there is no problem, you know the customer is satisfied and is likely to pay on time, and the customer knows you care.
• The next call (if necessary) is then scheduled for twenty days after that - ten days after the due date. If a genuine problem has arisen, it's early enough to deal with it efficiently. But if your being stalled, you'll know that, too, and you can act accordingly.

The secret is to be systematic and organized. We call it the "Twenty Day Diary" because to make it work, you have to keep track. Write down what was said, when, by whom, every step of the way, and you can't go wrong.