ICS Magazine

6 Tips On How to Lower Your Rising Accounts Receivables

April 19, 2009

It’s very likely you’re experiencing a cash squeeze. And with tough economic times, one area that’s bound to be on the rise is your Accounts Receivables. This is a double whammy if sales are falling at the same time. To stem the tide, here are 6 tips to go about lowering your rising A/R (Accounts Receivables):

1. Separate the money over 60 days and ask yourself “Why?” and “What do we need to change so it doesn’t happen again?”

2. Remember, it’s not a “SOLD” job unless there is a signed proposal with multiple installment payments based on objective things like “rip out” or “rough in” … And always get a deposit.
    Example: 30% on signing, 30% on rip out, 30% on delivery of new equipment, 10% on testing and permits.
3. Retraining some existing customers:
    “To keep our costs down and to be able to deliver on the promises we make, we require a signed proposal, which protects you, and a ???% deposit to reserve a date on our install calendar”
4. Find out who owes you money that’s over 60 days and decide is it because:
    a. We messed up and they’re not satisfied
    b. There is work we need to complete
    c. Are they truly tight for money?

      Note #1: Then, decide how many cents on a dollar you’d be willing to take to get cash in and get it off the books. Remember, real money in is better than money on the books.

      Note #2: Face to face is more effective at collecting money than a letter or a phone call. You can do all three, but nothing replaces face to face. Plus, it’s a chance to impress upon them about the liens you may have or their voiding of warranties. Make sure to do this in the nicest way possible as you also introduce the notion of taking cents on a dollar if it’s done quickly.
5. The acting Credit Manager (typically it’s the Owner) should be at the Weekly Meeting for Install Sales with the System Engineers (that’s what I call Sales People) to report where you are on outstanding money and for all to discuss what steps may be required.

6. Post the amount of A/R Outstanding on a whiteboard for everyone to see and make it everyone’s problem. Then, celebrate the wins as you bring it down.


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