This past weekend, I took a long walk around my neighborhood, the West End of Portland, Maine. It was one of those last brisk, sunny autumn days before ice covers the brick sidewalks and makes exploring difficult.
Since we are still in the middle of a pandemic, virtually everyone we passed kept their distance, and were of course wearing facemasks to help slow the spread of the virus. I am grateful that my Portland neighbors are responsible and care for their fellow citizens.
However, I could not help but notice a number of discarded broken masks on the ground. I thought it a shame that the wearer did not have the courtesy to dispose of the masks properly.
And, as I usually do, I made the mental leap to thinking about small business owners and their accounts receivable. It may seem like the king of all non sequiturs, but bear with me.
Just as some people discarded masks when they were no longer needed, too many small business owners essentially “throw away” their accounts receivables if they do not manage them. Don’t believe me? Ask a couple of small business owners if they have aging report. Ask them how many customers are over 90 days past due. Ask them if they have a process to pursue delinquent customers and collect the money that is due to them.
Some business owners will claim they “write off” the debt when in fact they simply ignore it. Even if they actually do write off the debt the tax benefits to most small businesses is minimal at best. On the other hand, collecting the money you have already earned can really boost your cash flow.
Accounts receivable management should be as integral a procedure as sales or operations. You can successfully manage your slow paying customers without losing them if you communicate effectively and make it easy for people to pay you by providing them different ways to pay.
As for customers who simply ignore your invoices, it is important to send the message that you intend to be paid. Crafting an effective collection letter is a good start. If your efforts do not succeed, do not hesitate to bring in the experts and hire a collection agency.
You would not have done the work or sold the product if you knew you were not going to be paid for it. If you respect your accounts receivable by managing them and communicating with your customers about the money they owe you, you will find they respect you right back with more on time payments.