10 Tips For Greater Cash Flow

It's a problem faced by virtually every  business - how to deal with customers who pay their bill late, or not at all.  While customers expect prompt and professional service, they don't always meet the same standard when it comes to paying their bill.

Accounts not paid promptly can severely impact the cash flow of a business.  A clearly defined and carefully communicated, yet diplomatic payment policy, may help avoid difficult collections situations.

1. HAVE A DEFINED CREDIT POLICY

The first step is to clearly define when accounts are to be paid.  If customers are not informed that accounts are to be paid on time, chances are they will pay them late, or sometimes not at all.  Make sure that your payment terms and expectations are clearly stated in writing to each person.

1. INVOICE PROMPTLY AND SEND STATEMENTS REGULARLY

If your business doesn't systematically invoice and bill, start now.  Many times bills aren't paid simply because the customer hasn't been billed or reminded in a timely manner.  Monthly statements aren't enough anymore.  Each customer should be reminded at the least every two weeks.  The lack of accomplishing this often occurs in smaller or newer businesses where there isn't enough staff to handle the billing properly.  If staffing or the cost of regular frequent follow-up is an issue in your case, help is available to get it done in an economical manner.  With our economy today, there is no replacement for getting this done one way or another.

1. USE "ADDRESS SERVICE REQUESTED"

One of the most difficult collection problems is tracking down a customer who has "skipped" -- or moved without informing you of the new address.  The U.S. Postal Service has a procedure to address this situation.  Any statement or correspondence sent from your office should have the words "ADDRESS SERVICE REQUESTED" printed or stamped on the envelope, just below your return address in the upper left hand corner.

If a statement is sent to a customer who has moved and the words "ADDRESS SERVICE REQUESTED" appear on the business's envelope, the Post Office will research this information.  If they can locate a change of address for that person, they will send you business Form #3547 with the correct new address for a small fee.  This can help keep your address file up to date and eliminate many of your items being returned marked "Forwarding Order Expired," and leaving you (and your A/R) in the lurch.

1. CONTACT OVERDUE ACCOUNTS MORE FREQUENTLY

No law says your business can contact a customer only once a month.  The old adage, "The squeaky wheel gets the grease" has a great deal of merit when it comes to collecting slow pay and delinquent accounts.  Contacting late payers every 7-14 days will enable you to diplomatically remind the customer of your terms of payment.

If recent economic conditions have made it impossible, due to reduced or inadequate staffing levels, to make contacts that frequently, never fear.  What used to be a benefit that only the largest businesses could afford, there are now VERY inexpensive services available that will do the contacting for you, in your name.  This accomplishes the level of frequency you need, without spending more money (often even less) than it would cost you to do the contacting in-house.

1. USE YOUR AGING REPORT, NOT YOUR FEELINGS

Many businesses (or some well-meaning people on their staff) have let an account age beyond the point of ever being collected because he or she "felt" the customer would pay eventually, and did not want to offend or alienate the customer.  While there are certainly isolated cases of unusual situations, the truth is that if your business is not being paid, someone else probably is.  So stick with your systematic plan of following-up on slow pay and delinquent accounts.  If it is done systematically and early in the process, it will soon be apparent who intends to really pay and who doesn't.  Appropriate action can and should be taken once you know where your business stands.

1. MAKE SURE YOUR STAFF IS WELL TRAINED

Even "experienced" staff members can sometimes become jaded when dealing with past-due accounts.  This usually happens when the customer has made and broken promises for payment.  Make sure the staff is firm, yet courteous when dealing with them.  Your business's collection staff may benefit from customer service training because, in effect, they must "sell" your customer on the idea that you expect to be paid.  Make sure that your staff is trained to not only bring the account current, but to also maintain good will.

1. ADMIT AND CORRECT ANY MISTAKES ON YOUR PART

Sometimes customers don't pay your bill because they think your business has made a billing error.  If that is the case, quickly admit it and correct the error.  Generally, customers realize that mistakes happen sometimes in business.  Unfortunately, some customers believe that the doctor "doesn't need the money."  Denying an obvious error your part only feeds the fire of resentment your customers may already feel.

1. ENSURE YOU ARE COMPLIANT WITH FEDERAL, STATE AND LOCAL LAWS

Collections, both in-house and outsourced, are governed by federal, state, and sometimes local laws and regulations.  In many cases, businesses are governed by the same laws as are collection agencies.  Ignorance of the laws and regulations that govern your activity is never an excuse, nor a defense, for breaking them.  For example: Calling to collect on an account at an odd hour or disclosing to a third party that a person owes your business money are just a couple of the collection practices that can cause serious repercussions.  Become familiar with the Fair Debt Collection Practices Act, the Telephone Consumer Protection Act, HIPAA and any state and local regulations pertaining to your location, or partner with someone who can help you remain compliant.

1. USE A THIRD PARTY EARLIER IN THE PROCESS

Most businesses have trouble keeping up with laws regarding contacting customers regarding their accounts.  Even if they can stay informed enough to ensure their compliance, the additional challenges that the regulations cause means that tactics must change.  In order to collect the accounts, more frequent contacts are necessary (see tip #4).  In a difficult economy, most businesses can not afford to hire the additional staff necessary to effectively and systematically collect before accounts age to oblivion.

Services are available that will accomplish the "in-house" follow up necessary to collect accounts early, while ensuring complete compliance to privacy and collection laws.  These services, like TSI Accelerator, can actually save the business the internal expenses of doing their own follow-up at a very reasonable price, and without alienating customers.

By the time an account reaches 60-90 days past due, the customer is sending a message.  They either do not intend to pay, or are waiting to see what the business will do to demonstrate their commitment to getting the account paid.  At that point, a third party can motivate a customer to pay in ways that your staff cannot, simply because the demand for payment is coming for someone other than your business.  Avoid paying a percentage to a contingency collection agency, using small claims court or hiring an attorney by using a flat-fee collection service such as TSI Profit Recovery.  Using TSI Profit Recovery can save your business both time and money, without having to pay a high percentage of any money collected.

1. REMEMBER THAT NOBODY COLLECTS EVERY ACCOUNT

Even with a carefully designed and implemented plan for follow-up and collections, there are a few accounts that will never be collected.  Save your business time and money by identifying these accounts early in the process.  At the same time, your business will benefit from the improved cash flow from the vast majority of accounts that do pay.

Developing and implementing a sound collections policy and strategy is a vital part of running a successful  business.  Follow these 10 Tips, and watch your business thrive while retaining a good professional relationship with your customers.