Tips for Collecting Past Due Accounts Receivable

During a consultation with one of my clients this week, he proudly stated, "Don, our past due accounts receivable are down from over $100,000 in October to less than $30,000 at year end! I still can’t believe what a difference those simple steps made in our collection process.” Later the same day, I spoke with a prospect who told me that more than half of hiscurrent past dues were more than 120 days. “I’ve tried everything I know to try. I’m just going to have to start beating the bushes for more business or I’m not going to make it." If both continue down the same path, which one do you think will be the most successful?

My client has been very busy over the last few months taking action so he would NOT be in this position. Unfortunately, the second owner is typical of many business owners today. Complacency when things are going well can be an absolute killer. Sales were good. Profits were good. What else could you ask for? Did you realize that many businesses who closed their doors last year had record sales? Did you realize that many of them also had record profits? The difference between profits and cash flow can be the difference between success and mediocrity, or even failure. One of the worst drags on cash flow is lack of accounts receivable management. How do I know this? I have been through it personally and I learned the hard way that failure to properly manage your accounts receivable can seriously damage your bank account. I was once forced to write off more than $40,000 in receivables to two separate clients…clients that I trusted…clients that I did special favors for and let them slide when they were late. I did it because I liked them…and I trusted them. Big mistake when you let emotions cloud your judgement in the collection area. When that happened it was painful and I don't like seeing that happen to others when I know how it can be avoided.

But from all adversity, there is a lesson to be learned. Everyone needs a system for collecting accounts. A system alerts you to specific steps at specific times and takes the guesswork out of sending letters and making calls. A system uses a letter that has been proven to work again and again, a call script that has been proven to work again and again and utilizes it increase your cash flow and significantly reduce your past due accounts receivable.

To survive in business, you must always keep your finger on the cash flow pulse. Many business owners I know are so focused on sales and profits that they forget that profits don’t pay the bills…cash does. Some of the most cash flow challenged companies in the world are those that are growing the fastest. One of the best ways to keep the cash flowing is to manage your receivables with flawless consistency.

Make sure that accounts receivable management has dedicated space on your calendar every single week.

And remember, accounts receivable management is not an event. It's an ongoing process that requires regular action. It requires a plan, constant attention, and dedication. Complacency and procrastination can kill you.

For more information on how to reduce your past due accounts receivable and give your cash flow a boost, visit the website at http://www.rxbizsolutions.com/ser_prs.php