FINANCIAL MANAGEMENT - COLLECTION/COLLECTION PROCEDURES
This is the 45th of a series of newsletters published on Business Management and Management Skills. Not all topics will apply to your business, but each section will be beneficial to establish company goals and objectives. By reading and studying these newsletter articles, youre taking the first step in achieving your goals.
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Dont tolerate customers using your money. If you do the work, you should get paid. If you dont get paid, dont do the work!
Statistics show that the longer a bill remains unpaid, the less chance you have of collecting. Start collection procedures as soon as the invoice is past due. Perhaps theres a misunderstanding that can be resolved or compromised by making contact with the debtor. Recognize the importance of maintaining your own cash flow and reduce the expense of borrowing money to replace funds being held up by your customer.
Customers who routinely delay payment as a matter of policy should become ex-customers. Customers who delay payment due to genuine financial causes are potentially placing your firm in the same financial condition that they are in. Be firm, fair and financially sound. Get paid on time!
You have various options in collecting unpaid invoices. Perfecting a Mechanics Lien prior to starting the job is a good investment. Dont allow the customer to insert a clause denying you this right. If the debtor is temporarily short of funds, work out a deferred payment plan over a period of time, charging interest until fully paid. If all else fails, use the courts in a lawsuit, or engage the services of a collection agency. Be prepared for major losses when your in-house collection efforts fail and you pass the task onto others.
NOTE: Other closely related topics in this series of articles on Financial Management are Legal (#21) and Billing/Invoicing (#41). Be sure to review these topics also.
Mike Holts Comment: I would like to extend a special thank you to L.W. Brittian, a Mechanical & Electrical Instructor in Lott, Texas, for reviewing and editing the various articles in these newsletters. His comments and suggestions have been invaluable in the preparation of my Business Management and Management Skills Workbook. This newsletter article was extracted from that workbook. Watch for our next newsletter, and as always, we invite your comments and feedback. Send us your real-life experiences. We value your opinions and participation. Please respond to Barbara@mikeholt.com. And be sure to visit Mike Holts Website at http://www.mikeholt.com
Copyright © 2002 Mike Holt Enterprises,Inc.