I have a really important question for you.
Do you have an internal collection plan for your business? And, if the answer is yes, do you follow it?
Many small business owners often implement critical marketing and sales strategies. Yet, they often fail to properly address and plan a vital component that ensures the health and success of their business: an internal collection plan as part of an overall Accounts Receivable strategy.
Most small business owners understand that an internal collection plan is an essential element of an overall Accounts Receivable component of a business, but fail to make it a priority.
An internal collection plan is an important element of any best practices plan for a company.
Why is the accounts receivable component of a business and an internal collections plan so important?
The planning and implementation of your collection plan is essential to guarantee cash flow which provides critical working capital to the business.
The bottom line is that a utilized collection plan will result in fewer outstanding account balances, enhance cash flow, cause fewer bad-debt write-offs, and help achieve and maintain profitability.
There are three critical components of a company’s accounts receivable department. They are:
- Credit policies and management-Credit management which includes communication of credit policies, credit checks and approvals, including credit maintenance;
- Good Billing Practices-timely and systematic invoicing of customers;
- Internal Collection Plan-Collections encompassing methods to monitor and remain proactive rather than reactive.
The objective of having an internal collection plan is for the small business owner to take a positive, PROACTIVE approach to getting paid rather than dealing with collections as a problem threatening the growth and viability of the company.
An internal collection plan should include:
- Making collections a major priority along with sales, marketing and other important functions of the business.
- Establishing collection goals and time limits as part of an overall Accounts Receivable strategy.
- The establishment of systematic billing practices and monitoring of payments for a company’s goods and services.
- The integration of good customer service practices with the timely collection of accounts receivables-customer satisfaction can be gauged by the timely payment for goods and services and can be used to learn more about your customers.
- Monitoring credit limits and performing periodic credit checks after credit is granted.
- Establishing a systematic assessment review of collection practices of the progress, quality and attainment of collection objectives at defined milestones.
In many cases, a typical small business owner is busy managing the day to day operations of a business performing critical functions such as salesman, manager, human resources director, etc. and typically has little time to effectively implement a dynamic Accounts Receivable component that includes an internal collection plan.
That’s where my company, Accounts Receivables, Inc. (ARI) comes to the rescue! ARI offers a unique beginning-to-end solution designed to consult, develop and transact a small business internal collection plan and to transform the operation of a small business Accounts Receivable processes.
From the point invoice data is available, through the posting of cash received, ARI allows its customers to concentrate on their core business, secure in the knowledge that the Accounts Receivable portion of its business is professionally, accurately and securely performed.
An extensively trained and experienced consultant from ARI can evaluate your collection needs, strategies, and goals, and prepare and implement the critical internal collection plan your business needs to guarantee cash flow, profitability, and success.
Melissa Nash Andrews is the Vice President of Accounts Receivable, Inc. and the author of “How to Get Paid On-Time, Every Time”