One of the biggest concerns of any business, but especially growing small and mid-sized companies, is cash. In order to support growth, these companies must have access to working capital and the cash flow necessary to invest in their growth strategies. The problem is that cash flow is usually held up in accounts receivable. Because accounts receivable management tends to get pushed aside due to more obvious business struggles, many companies don’t even know they have a problem until they begin to notice a shortage of cash and difficulties meeting financial obligations- by that time it’s too late.
The fact of the matter is this; if you offer credit terms then you probably have an accounts receivable collections problem and you don’t even realize the negative impact that it’s having on your bottom line and your cash flow. Avoid an accounts receivable crisis; recognize these 23 telltale signs that you need to focus on improving accounts receivable management in your company.
- You call past due accounts only when you need to make payroll
- You just stop trying after 90 Days…which happens way to frequently
- Your answer to bad debt is sending everyone to third party collections
- You have to factor bad debt write-offs into new prospect proposals.
- Your part-time A/R clerk would rather email customers than talk to them on the phone
- You have no idea what your DSO is.
- You have to increase your credit terms in order to reduce DSO.
- You send customers invoices after the due date.
- You don’t remind your customers to pay on-time because you don’t have time yourself.
- You don’t call your customers until they reach 120 Days…they won’t pay you on time anyways, why try any earlier, right?
- You think that your ERP system can help you manage credit and collections.
- You have more fax numbers for your customers than email addresses.
- You have more A/R Over 120 Days than Current.
- There’s an issue with every first-time invoice sent to a new customer.
- Credit and collections is seen strictly as an accounting function and not integrated with your sales team.
- Your customers can only pay you via check.
- You have never checked your customer’s credit reports.
- You have no way to keep track of the emails you have sent customers.
- You have just as many invoice disputes as paid invoices
- You have no visibility into your credit team’s accounts, and they aren’t open to visibility
- Customers have no way to self-serve their payments on their own time
- You spend a majority of your waking hours frustrated with customers
- Your sales team controls how much credit a customer is granted
Even if you relate to just a few of these accounts receivable management problems, you likely are facing an even bigger cash flow issue than you realize. If you’re lacking visibility into your team, your DSO or your customer communications you should look into a way to overhaul your accounts receivable and find a solution.