During such a volatile market place and with people staying home and not utilizing your business services or products as normal, we need to do what we can to keep our own business healthy. One area to focus is your accounts receivable.
Accounts receivable health translates to cash flow and liquidity.
As our customers become concerned about their personal income or business income, they may slow down on payments. Unfortunately, they are going to pay the people that are reminding them first. The squeaky wheel syndrome. I am not suggesting you over-react, but I am strongly recommending that you put effort and focus on your receivables and credit. Here are some tips I have been advising our clients on:
- Review a detailed aging of accounts receivable list.
- Send a reminder to any and all accounts that are past due.
- Any account that is a large $ amount or large % of your receivables, you should call and see why their payment is late. It may be that they need something from you. If they do, this gives you the opportunity to get it to them right away. If they have everything, ask them if you can pick up a check or ask when can you expect it. They have to prioritize your payment, and if they hear from you it is more likely.
- Any account over 90 days may require more drastic action:
- You may need to physically visit the client to find out the plan or see if you can get a check.
- You may need to put them on cash only (COD).
- You may need to work on a payment plan.
- Any account that is in an industry that you perceive is at significant risk, I would make an appointment to go visit the client. They may have financial resources that will easily carry them through the restrictions resulting from the coronavirus. But if you can talk directly with an owner or high level financial person, that can give you a more reliable comfort level. If they are concerned too, then develop a plan proactively.
If you are still offering credit to new customers in this market, don’t do so without a credit check. Typically, small business owners are very trusting and sell readily on credit, especially to bigger companies. If they don’t pay you quickly or at all, this can have a much more significant impact on your business.
I think it is fair, responsible, and necessary to review your credit policy and process and make sure that you set up a process to check credit references if you are extending credit to new customers.
There are many areas of business that small business owners need to attend to with the current Coronavirus situation. Sign-up for our email list to get more suggestions/recommendations in managing your business: https://vv151.infusionsoft.com/app/form/newsletter-updates
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