I think we all agree, in business cash is king.  Yet so often our cash is encumbered by how we get paid, and how we get paid is controlled by our customers.  Most businesses should set a standard that calls for at least 98% of all receivables to be “current” at any time.  Of course, “current” is defined by every business, but normally this means payment on or before the due date you set.  No matter what your standard for current is, in every business no more than one half of one percent (.05) of your accounts should ever be over 90 days past due. If you find your past due accounts growing in number, a sure way to resolve the problem is to remember:  You create your own collection and payment cycles.

Here’s a tip:  Set clear standards for your Accounts Receivable Department to measure current and past due accounts.   Measure your results as percentages of total A/R’s counting accounts that are current (within the scheduled due date), 30 to 60 days past due, 60 to 90 days past due, or  90 days plus past due.  If you set the standards accurately, you can use these to manage the Accounts Receivable process no matter what your normal payment cycles.  It may take some time and effort to bring past due accounts current, but you will have a clear measure to determine where you are as you work toward that goal. Also, consider revising your payment options.  If your business allows for it, consider moving you’re accounts towards EFT, Drafting (ACH), or Credit Card payments.  While there is no crystal ball that will tell you exactly how quickly you will get paid, if you are using an electronic payment process you are likely to see your cash much faster.  The small fees charged for these services are usually well worth the cost.  This is particularly true if you are in a reoccurring revenue business.

This has been your CEO Rule of the Week.  I am Ruben Estrada.  Your Next Move

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