Our experience has shown that by following the simple suggestions below you will reduce your Accounts Receivable and Days Outstanding, increase positive cash flow and allow you to concentrate on building your business or practice rather than chasing after customers or patients to owe you money.
Tip #1 - Establish a Plan and STICK TO IT
You should have a specific internal process to manage receivables. The process should include a set schedule for invoicing/statements/phone calls, and use of a third party Collection Agency if needed. Finally, stick to the plan. No exceptions.
Tip #2 - Make Someone Accountable
Make someone in your business accountable for the process and the results. By assigning responsibility and "ownership", you will ensure that the process is followed and results are monitored.
Tip #3 - Schedule Periodic Reviews
Schedule a review of your receivables and collection efforts on a monthly basis. A monthly review will identify problem areas in a timely manner and allow you to make adjustments to your AR plan as needed.
Tip #4 - Don't Allow Receivables to Age
Receivables are NOT like fiine wine - they DON'T get better with age. In fact, government statistics show that receivables that have aged over 60 days (that's just 2 months) will lose .5% of their value every single day thereafter. By letting your receivables age, you are effectively throwing money away. Don't let that happen.
Tip #5 - Nothing Personal, Just BusinessKeep in mind that you're running a business, not a bank. Maybe you have a debtor who has been a customer for many years, but has an outstanding bill. Maybe your debtor has a special circumstance that you may know about. Regardless of the circumstance, you should do everything possible to resume a dialog with your debtors with the objective of getting paid or at least working out a payment plan. Don't let the debts age, as your customer may move without a forwarding address, or even declare bankruptcy, leaving you in the lurch.
Tip #6 - Use a Third Party
Part of your plan should include the use of a collection agency, attorney or small claims court for receivables that age past a date certain. The impact of a third party on your debtors cannot be overestimated. You will recover more money at less cost than you could internally, and your staff will be free to focus their attention on "younger" more collectible receivables.
Tip #7 - Stay Calm
We understand that receivables can be aggravating to the point where it gets ugly. It's upsetting and maddening, but you should resist the temptation to fly off the handle. Anger can lead to unfortunate circumstances that may not work in your favor. If you've exhausted all of your in-house efforts, let professionals handle the problem. They know the rules. Professionals who deal with debtors know what they can say, and when they can say it. Trying to go it alone might give you some personal satisfaction, but in the end, will waste your time and most often, will NOT get you paid.