Let me start by saying if you have receivables, congrats! It means you’ve sold something and all going well, cold hard cash will arrive in your bank account.
But have you counted the cost of offering credit to your customers? For a lot of businesses the costs really add up, and they’re not just financial.
This one is a no-brainer. How much time do you or your team spend reminding customers to pay? How much time do you spend talking to voicemail services? How many statements do you print, fold and send?
Late payment conversations with customers are awkward and stressful for most business owners. They’d rather be talking about the next project. Then there’s the stress and sleepless nights that come when cash is tight.
#3 Missed opportunity
When your time is consumed with chasing payments and your hard-earned cash is locked up in receivables you simply have fewer resources to invest in sales, marketing, product development, hiring more staff, etc. If you could turn your receivables into cash faster and get another $50k in the bank what would you invest in to take your business forward? Or maybe you’d spend fewer hours at the office – no ‘lying on your deathbed wishing you’d worked fewer hours’.
I’ve talked to so many business owners who are distracted by debtors. Rather than thinking strategically, they’re worried about covering rent and paying wages. What if you could clear the deck (and your desk) of overdue invoices and set your mind to the more valuable opportunities you’ve not got around to?
#5 Unhappy customers
Having a sporadic or disorganised approach to following up slow payers can put your customer relationships at risk. If you’re not following up overdue accounts regularly then, when you do follow up, it comes as a surprise to the customer. Even worse, the overdue amounts are usually higher. Good credit control practices equal good customer service. How and when people pay your invoices is all part of the experience of dealing with your organisation and influences the likelihood of repeat purchase.