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Improve Your Cash Flow
When a business sells a good, or provides a service, it has a right to be paid in a timely manner.
And, in today¡¯s competitive environment, effective credit and collection policies can make the difference between tiny or tidy profits.
The following 10 tips can help your company maximize its cash-flow, while minimizing its slow-pay or non-pay accounts.
1. Have a Clear and Concise Credit Policy.
One of the main reasons for slow-pay or non-pay accounts is that the business has not clearly defined to its customers (and employees) the company¡¯s credit policies.
Confusion often leads to inaction on the part of the customer. And, inaction means that you don¡¯t get paid.
Make sure that the payment schedule, payment date, and penalties for late or non-payment are clearly stated. You may even require the customer to initial the contract next to each of these important sections. And, always give the customer a copy of their contract for future review.
2. Properly Train Employees and Staff.
Make sure that each and every employee understands the importance of proper and consistent collection of accounts receivables. After all, their job depends on it.
Make sure that your employees explain your policies clearly and accurately to the customer during the purchase process, going over the main sections of the contract with them.
3. Invoice Promptly and Properly.
One of the most difficult things for a small business is to keep on top of accounts receivables. If you don¡¯t have a systematic invoicing and billing system, you will likely fall behind. Often times the only reason a customer hasn¡¯t paid is because they haven¡¯t received a bill or been reminded to pay in a timely manner.
4.Contact Customer Promptly Following Late or Non-Payment.
Research has shown that the longer you wait to contact a delinquent account, the lower your chances of collecting the debt.
Try to contact past due accounts within 14 days, and on a weekly basis thereafter.
The bottom line is this: If you aren¡¯t being paid, someone else is. Make sure that that ¡°someone¡± is you by calling often, in a polite, professional manner.
5. Be Precise in What You Expect from the Customer.
Never leave a contact open ended, such as, ¡°We¡¯ll talk next week¡± or, ¡°I¡¯ll send what I can.¡± Every contact that you make should result in a specific commitment for payment, by a specified date.
6. Control the Conversation.
Even the most experienced staff member can sometimes let emotion get in the way when dealing with delinquent customers. Don¡¯t let customers sidetrack you with personal history or a variety of excuses. Remember, the object of the call is to collect the money that they owe you. Be firm, yet courteous when dealing with them. And, above all, don¡¯t feel guilty for asking the customer to keep their end of the bargain.
7. Be Flexible.
Be ready to adjust to the situation. The best solution in a given situation may be a new payment plan. Be prepared to accept a reasonable payment schedule, and willing to be flexible with a customer¡¯s circumstances.
8. Keep Accurate Records.
Keep detailed, accurate notes of every contact you have with the customer. Accurate records will help with subsequent phone calls and in making future credit decisions; In addition, it may become important if litigation becomes necessary.
9. Follow All Collection Laws.
Each state has different collection laws, so make sure that you check with your state¡¯s department of finance to see what laws your state has regarding collecting delinquent debts. In many states, businesses are governed by the same collection laws as collection agencies. For example, calling customers at an odd hour or disclosing personal information to a third-party can cause you serious repercussions. Always remember that the customer has rights, and make sure that you never violate them.
10. Use a Third-Party to Collect Past-Due Debt.
After 90 days, the success of in-house collections drops by 80%. If your customer still hasn¡¯t paid after 90 days, your best option is to turn those accounts over to a collection agency. A third-party can motivate the customer to pay in ways that you cannot.
At SIMPLETOUCHCollections, we are committed to helping you collect on your delinquent accounts, and keep your cash-flow, well, flowing.