| Expecting returns on expenses seems contradictory. | | | | very important to have a easily maintained receivables |
| How can you earn money on what you spend? There | | | | aging. This document is standard in almost all |
| are several areas to target and we will examine each | | | | computerized accounting systems. It will break down |
| one in this series. The first is using your credit policy | | | | your outstanding receivables into several categories |
| wisely. Do you invoice your customers on a regular | | | | based on the age of the invoice date. The most |
| and prompt schedule? Your customers can not pay | | | | common categories are current, 30 days, 60 days, 90 |
| for items or services not invoiced and the longer it | | | | days and over 90 days. And you must be willing to |
| takes for them to receive an invoice the more likely it | | | | make the phone calls or send the letters to ask for |
| will be that payment will be delayed. While you will | | | | delinquent payments. This is one area that many |
| have paid vendors and payroll you will be waiting for | | | | business owners are reluctant to do. And please |
| payment and perhaps financing your operation costs | | | | remember there are laws in place that prevent you |
| with interest bearing loans. | | | | from making threats, using unacceptable language and |
| Make sure you describe clearly your terms and | | | | harassing people. The best way to handle delinquent |
| collection policies to your customers. Most customers | | | | clients is to politely explain why you are calling or |
| will assume 30 days terms if you do not tell them | | | | writing, ask if there is a problem with the product or |
| differently. And think about what your terms are prior | | | | service they received and if there is to offer a solution |
| to extending credit to customers. How long can you | | | | to correct the issue. Should it be a case of the client |
| afford to carry the cost of credit? And remember | | | | not having the funds to pay in full at this time you may |
| cost includes all expenses incurred to produce the | | | | want to suggest a payment plan that they can stick to. |
| product or service you are selling and the cost of | | | | And get it in writing with their signature along with a |
| carrying that expense. Even if your cash flow allows | | | | clear explanation of what the consequences of |
| you to extend credit without borrowing yourself, there | | | | non-compliance will be. |
| is a cost of someone else using your money and that | | | | Of course by carefully checking their credit references |
| expense should be added to the cost of the sale. | | | | you may avoid all of the above. Ask for the name of |
| Will you offer a discount for early payment? | | | | their bank and at least three business references with |
| Will your margins allow you to offer this discount and | | | | addresses and account numbers. And follow up on |
| still make a profit? | | | | their references. Check to see if their references are |
| Do you have the ability to track when a discount | | | | real (are they listed in the phone book for example). |
| should be allowed and will you rebill for that discount | | | | Call their references and ask how long have they |
| should the payment not be received in time but the | | | | been a customer, what is their payment experience, |
| customer stills takes the discount? These are all | | | | have they ever paid late. There are also services that |
| important questions to answer before you decide to | | | | provide credit reference checking at a small fee. |
| offer credit to your customers. If you do not take the | | | | Extending credit to your customers can increase sales |
| time to answer them you risk your cash flow, profits | | | | if you are prepared to do the work that is necessary |
| and perhaps your business' success. | | | | to keep your costs down and your customer |
| If you do decide to offer credit to your customers it is | | | | payments timely. |