Time is money
Even a profitable, well established company can be wiped out in a blink when clients fail to pay their bills. That is what almost happened to a major Brazilian cosmetics company: long standing clients continued to place large orders for cosmetics, ignoring the recession and depressed sales. They failed to pay their accounts and the cosmetics company almost went broke. The CEO and founder, a charming and talented woman, had to get an investor in to save the company. He is now the financial director and her stake in the company has diminished to only one third ownership.
If this CEO had been ruthless with unpaid accounts she would not have had this crisis. But that is often how it goes: most business owners spend almost all their time onto getting new business. They forget about the deals they have already closed.
In for a surprise? List the accounts you have that are overdue. You will not believe how much of your money is out there. Go after it. Flag the clients that are more than 30 days overdue and take immediate action. Once an account becomes three months overdue, you will most likely only collect 73 cents for every dollar or euro. After a year that drops to 25 cents of every dollar or euro owed. These statistics are from collection agencies.
Another tip? Before launching firecrackers like a collection agency would, call the customer. Ask why he or she hasn’t paid your bill. When your customer realizes the debt is affecting you personally and doesn’t belong to a faceless business, payment will probably follow. If not, act quickly. Get that ten day demand letter out. No receipt within the ten days? Contact a collection agency. Nobody wants to be in the dreaded debtors’ file of a collection agency and so they pay up.
The best tip? Set up an early warning system on your computer. You could use Excel, the standard software by Microsoft. List your customers under column A. Under column B the last payment; column C will show you the days overdue if you insert the formula =TODAY ()-B2. Every time you open the file, the computer automatically updates the due accounts.
What are you doing about money that is yours and is outstanding?