There exists a saying among credit professionals; it is only a sale once the money can be collected, until then it’s a gift and we’re not in the gift giving business.
If you are a small business and so are not collecting from your customers in the timely manor you need to re-evaluate your own credit/collection practices.
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Many small business owners are experts in their field but may not feel comfortable about contacting their customers for money that is due.
There is also the misunderstanding that a credit /collection professional will stunt company growth simply by denying sales. Some fear they are going to lose customers by having someone ask invoices that are past due. Both are usually completely false; in fact a credit score professional can actually help to increase sales for your business and improve customer preservation.
The collection process needs to be a consistent systematic approach. It is much better to be proactive than reactive; when it comes to your cash flow for your business.
When you are proactive you are calling the customers and unveiling problems early on in the collection procedure. This gives you time to make the essential corrections or supply the customer along with additional documentation.
What this will do is bring in more cash for the business; much quicker than if you sat around waiting for the customer to send in their payment.
12 Steps To Improving Your Cash Flow
1) Always be professional.
2) Utilize a customer service approach, be a problem solver.
3) Run an aging of customers each month.
4) Be prepared; review the customers’ file before phoning them.
5) Know what leverage available for you (is an order ready to ship)
6) Call all customers (once the invoice is 5 days beyond terms).
7) Confirm contact names, numbers and email addresses of Accounts
8) Don’t be afraid to ask for the A/P Mgr or Controller to get answers upon past due invoices.
9) Keep Great notes; document everything.
10) Efficient follow up is a key success element! Use Outlook to schedule follow up phone calls or a check promise. (Follow up calls should be scheduled based on the information you have been told. If you leave a note; call back in a couple of days. )
11) When you do leave a message; also send out a fax or email using the past due invoice. This will keep your title in front of the customer and increase your likelihood of being paid.
12) Return calls promptly, delaying means less money for you personally.
Implement these steps on a regular basis and you will observe an improvement in your cash flow.
For the small company owner who does not want to be bothered phoning customers or cannot afford the expense (salary and benefits) of employing an employee to do this job. You are faced with a couple of options; keep ignoring the problem and continue struggling with slow income or outsource your credit plus collection function to a professional credit consultant.
Fact: Cash flow is the center of your business; without it your business will soon come to an end.
In case you are a small business and are not collecting from the customers in a timely manor; you should re-evaluate your credit/collection practices. In order to improve your cash flow you must have consistent plus effective collection practices in place for the organization.