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   Maintain a Consistent
   Ebb and Flow


Receivables donít have much value if they arenít turned into cash.
 
Your company really needs to keep tight control on its invoices outstanding so you can get an accurate picture of the receivables situation and take steps to improve the turnover of those accounts.

Here are five steps that can help you speed up the collection process and motivate your customers to keep their payments timely:

1. Conduct an accounts receivable ďagingĒ on a regular basis, ranked by the invoice date, not the statement date.

For example, suppose you ship merchandise with an invoice on the first
of the month. Invoice aging will correctly show that, by the end of the month, the account is 30 days old. If you age your accounts according to the statement date, the report will incorrectly show that the account is current.

Aging gives you not only a better handle on how long accounts are overdue but also the dollar amount of your company's receivables outstanding.

2. Regularly reconcile the accounts receivable ledger with the general ledger.

3. Offer discounts for prompt payment, and be sure to keep tabs on which customers receive this incentive. Many companies continue providing discounts to customers whose payments miss the deadlines set for the special deals. This hurts cash flow and chips away at the bottom line.

4. Give customers credit ratings and distribute those ratings to the appropriate departments in your company. This includes sales, customer service and data processing. If you revise a customerís credit rating, adjust every departmentís records accordingly.

5. Train your sales force to accelerate collections. For instance, an associate can tactfully remind an existing customer of an outstanding bill before selling that customer another product or service. Consider giving your sales team the leeway to reduce late fees or past-due interest charges in exchange for payment on the spot.

 

Virtualex.com Ronald J. Cappuccio, J.D., LL.M.(Tax) 1800 Chapel Avenue West Suite 128 Cherry Hill, NJ 08002 Phone:(856) 665-2121 Fax: (856) 665-9005 Email: ron@taxesq.com


 
 
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