Attract the Right Job or Clientele: Getting Paid For The Sale
NOTE: Today’s blog speaks to a business doing fairly well. However smaller entrepreneurships will do well to learn from the more experienced, and job-seekers will do well to take this insight and apply as appropriate to questions on the next interview.
A sale isn’t much of a sale at all if you don’t get paid. Delays in accounts receivable reduce cash flow and can even make you a less desirable candidate for a loan. Getting paid is the whole point of the sale, and there are steps you can take to speed up the stragglers. Here are some tips to collecting payments more quickly.
Improve cash flow by reducing accounts receivable delays.
Take Inventory of Your Current Situation and Determine Your ART
First, determine your Accounts Receivable Turnover (ART). According to Inc., you can determine your ART by dividing your net credit sales by your average accounts receivable. If you earned $200,000 the prior year, and you were owed $50,000 on average in receivables, you ART was four.
Shorten Your Credit Terms
One way to lower your ART is to reduce the number of days credit is extended in your contract. Businesses often set their terms at net-30. That means payment is expected in 30 days. Others ask for payment on receipt. Many businesses don’t have the fluidity to give payment on receipt, but net-30 can drag out into the next month for all kinds of reasons. Choose something in between. Take net-30 down to net-15 or net-7 – this way you’ll be able to absorb any delays.
Be Efficient on Your End
Streamline your own billing procedures, whether that entails hiring a dedicated employee or investing in a better class of software. Generate and send invoices as quickly as possible, and ask for initial deposits to reduce the amount of outstanding credit. Finally, extend incentives and show preference to those who pay expeditiously.
Focus on Strengthening Your Front Line Employees
As discussed in the article “4 Ways to Improve Collection Efficiency and Reduce AR Days,” the healthcare industry is a great example of an industry that necessity forces to streamline billing and reduce ART. One of the best things a medical center – or any business – can do is empower and prioritize its front line staff. Front line staff are the personnel who deal with billing everyday. Before you put pressure on them to collect faster, ask what they need to further that goal.
Get paid faster by shortening your credit terms.
A sluggish payment system can lead to an anemic ART. Accounts receivable delays clog the cash-flow pipes and put up red flags to jittery lenders. Do what you can on your own end first by empowering the employees in the billing trenches. From there, consider taking action like adjusting your credit terms.
Andrew Lisa is a freelance writer who covers small business management.
Following these insights will lead you to the Smooth Sale!
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