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'Accounts Receivable' is your money. Why let other people use your money in their business?

The importance of getting customer credit conditions right and paying attention to the collection of receivables cannot be stressed enough. The effect on cash flow can amaze.

I'm sure you are aware of companies going bankrupt when they appear to be asset rich. 'Accounts Receivable' is a current asset … but if you can't or don't actively collect the money, they're …

WORTHLESS!

This is an area where many Small Business owners let themselves down through a lack of attention.

Essential activities include:

• All salespeople need to understand the importance of credit checks and approvals. They can explain the process to prospective customers where necessary. A written credit policy should be accessible by all staff.
• Some managerial emphasis should be placed on cash flow; your creditors need to be paid even if you're not.
• Before proceeding with an order fulfilment process and advancing credit, ensure credit checks are complete and the outcome satisfactory. The cost of credit checking is worth it. Do not skimp on details. Salespeople should not be credited with a sale unless the sale is 'clean'. Why should it be up to office staff to sort the mess out?
• Promptly issue invoices and keep up with any associated paperwork.
• Have a credit card facility, sure they cost a little, but in the long run they pay for themselves in time and accessible cash.
• Chase overdue debtors and be consistent about it, it must be 'policy'. There is no point in following up an account immediately it has fallen overdue, one month and not the next. This may possibly indicate to the debtor that you're short of cash so they can put the squeeze on.

STICK TO YOUR POLICY!