Managing receivables in todayts economy

f, r-l aUsTNESSES LosE clients during a receding (or .CLrecovering) business climate. The revenues from these clients must be replaced in order to maintain profits and growth. Yet, there is risk in working with new clients. Of 10 new clients, six will pay on time, two will pay in 60 days, and two will become a receivable problem. The risk must be managed carefully to assure business growth that is profitable.

The profiles of those new clients that can become a receivable problem include :

. New business - 20Vo of all new businesses fail within l8 months of startup.

Existing clients can experience a contraction in their own business. Will they contract further, or rebound and prosper?

Current statistics are frightening. During the past three years, there were over 4 million bankruptcies filed in the U.S. Over 150,000 were commercial filings. Assuming the 2013 business climate improves only slightly, the number of bankruptcies will be enormous and can have a definite

Thank impact on your bottom line.

At the same time, a post-recession (or depression) business environment offers a unique opportunity. By offering timely services to those businesses undergoing change, you may gain customer loyalty forever.

Survival Gomes with Gash Flow

Most commercial businesses can delay payment of their accounts payable, thereby assisting in the financing of their receivables. Other services of financing for your receivables are available, but, there is an associated cost. Timely pursuit of your receivables reduces both your costs of financing and the likelihood of incurring bad debt.

In today's economy and highly regulated business environment, cash is king. And, accounts receivable is the next best thing to cash. Minimal credit losses are crucial for survival regardless of the industry.

Minimizing Your Gredit Losses

A review of how you extend credit is essential to minimize losses. Credit applications are a valuable tool to reduce exposure. A credit application offers protection against significant losses. Credit applications should include, at a minimum, the customer's legal composition, address, the officers' names and references from other firms (including other temporary firms) with which your customer has been doing business. Check with at least three companies to determine how much credit has been extended and their payment history. Additionally, a good credit application will outline credit terms, collection procedures, and liabilities in the event the invoice is not paid timely. Often, a credit application includes a personal guarantee clause, or a separate personal guarantee document. This can offer additional protection as the financial obligation is guaranteed to be paid by an individual if the business fails to pay.

In addition to a credit application, a credit report should be run, especially when your exposure justifies this additional cost. Any judgments or tax liens should raise a red flug.

Timely Gollection of Receivables

Whether the economy is in recession, recovery or growing, solid billing and collection procedures are a must in order to maximize cash flow. Internal collection procedures should be timely and offer a systematic method of lirllorv-up at rcgLrlar interr,'als ( 10. 30. '15 clavs past rluc). Retrindcrs. statemcnts. past cluc notices. ancl tclcphone calls are scvclal critical ntethods available.

Tlrc contacts should be tnaclc to thc pclsol] that ci-In uuthorize thc pavmcnt. Contacts shoLrld be kcpt short and prof'cssional. Appcal to thc pride and honcsty of thc customer. Bc personab lc and film. I)roblcms rtr clisputes shoLrld surfacc il'thcrc is a cush flow issLrc. Hancllc cvcrvthin-g accuratelv ancl quicklr'. and put all arrangcnrcnts. paynrcnt scheclulcs. lr Itd irttr'r't'st ehulqcs irr writinu. including latc t'ees. i1' applicable.

Follow up on cverv lrccount to thc lroint r.'r,hcrc cornmunication, or lack thclcof. indicatcs that an alternalivc action shoulcl be taken. Yor.r rnust uti lizc third-partv prol'cssionals to cnlotcc paynlcnt oncc collilTlunlca tions brcak down. Timc is lbsolutely critical. To delay could al'lcct the ulti, matc collect.rbility of that accoLlnt.

Aggressively UsingProfessionals

Ma.jor bcnefits of' Lrtilizing un outside collcction servicc includc:

. Proccdures. contacts and fitllowup fronr a third party comnlrncls llttention lhrrn the dcbtor.

Most collcction scrvices ol'l'cl l contin-rencv lcc progranr. That is. lccs arc only carncd by thc collection scrvicc if it succcssfully rcco\rers monc\'. Motivatecl to collect thc account. it collcction scn ice oflcrs l stfong psy chological aclvantage.

The use o1' the collcction servicc allows your crcclit dcpaltntcnt morc tirrrc trr gllnl ur'\'rlit. rcr ie u lricuunt:. rrttrl l'trllou -Lr| ()n e un'cnI irtroie cs rathcr tlian bc involved in thc rcpcated pursuit of past-clLrc delinclucnt custorllcf s.

Whcn selccting un outsiclc collcctirrn Iirrl. trsc tlte strrnc e ritelilr il\ you woulcl in selecting any busincss service: firnr reputation. conrpatibility and pcrlirrrnancc.

The conrpany yoLr choose should be fully liccnsed and bonded for your proteclion. A quality. profcssionul collection sclvice is a r,'clv cost-c1'lcctive tool uhcrcbv a clicnt has at thcir clisposal , an cntire prof'essional staff providing onc of the ntost nt:eded. inrprrrtunt htt:i rterr :et \ ier':.

Getting Motivated

-l-hcrc is only so much tinte in a drrr. f irttc ustrlrllr Joe: rrol Pelrnil that all itcms on thc to-do list get donc elrelt tlir-r. A t:trotl eollce(ion servicc will. in a timely Inlnner. consult with a clicnt at no cost and provirlc the motivltion fbr chrngc. It is csscntially time wcll spent.

Thc nranagcntcnt of acu^ounts rcceivublc is a constant ongoinu lrusiness lunction. A prol'cssional and a-gglcssivc approach couplecl with solid. systcmatic ploccdures will :rllou yrru lrt ns1 tt'-''-', survive itt u recovcring econom),. but prosper. RetlUCe t()nl()l'l'()\\ 5 l()r.es - imPrrrrt. vour proccclurcs and proccsses today.

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