Constant and stable cash flow is one of most critical factors in any successful business and enterprise. All enterprises deal with day to day activities that involve expenses such as payroll, rent, utilities, and another miscellaneous expenses. To handle it properly, they need cash. However, no organization will be capable to prevent accumulating large amounts of accounts receivable or ARs that can cause major delays in cash flow. ARs are generated when an organization makes a bida line of credit to a customer who defers payment for a product or service to a later date. As long as the payment hasn't been collected, the bill is still receivable and awaiting collection and payment. If your business has built up a pile of receivables, you need to quickly teach how to reduce this pile to dust and obtain some money back into your business.
1. Hire a credit and collections professional. To reduce and even prevent the build-up of ARs that severely impact a company's ability to compete and do business, it is imperative that you hire personnel who can take care of this problem. A professional trained in credit and collections, billing, and accounting should be capable to track your ARs and apply associated resolution and collection policies to reduce them. The investment in hiring people with these specialties may be expensive, but it is well worth it if you are all the time bombarded with piles of ARs.
2. Automate your system. Discover and purchase billing and accounting program that will assist you track and monitor your company's ARs. Program that can supply aging reports whenever you want or need it. Make it a point to do a fast aging search every 30 or 60 days to see the clients you need to gather from. With this report you can allow your people follow the collection and payments.
3. Communicate with your clients and suppliers. Once you have got your hands on an aging or AR report, it is time to contact every person or company on list to make them aware that payment is due. Some companies and people may not have an organized system to save track of their creditworthiness and what they owe. Contact them and remind them to pay.
4. Hire a collection agency. For ARs that have aged well past their expiration dates and have been followed up consistently to no avail, it may be high time to leave the job to those experienced in hardcore credit and collections. There're dozens of debt collection agencies that you can hire to do the debt collection work for you. Save in mind that if you contract these people, they will need a percentage of what they collect for you. This is a last resort in gathering payments before considering legal action.
When implemented together and effectively, these strategies can significantly reduce the number of ARs your organization has built up and turn that into cold, hard cash that you can spin around your business.