Avoid Bill Collection Problems By Being Smart At Start
POTTSTOWN PA – Business relationships are usually straightforward. Companies provide a product or service, and customers them in a timely manner. But volunteer members of the Pottstown PA chapter of SCORE, the Service Corps of Retired Executives, know every small business owner will likely have to deal with tardy or missed payments. Don’t ignore them, or assume the customer will eventually follow through, SCORE counselors advise.
Money owed to any business — known as receivables — cuts into profits and complicates cash flow. A good collections strategy can help prevent slow payments before they become a problem, and ensure that income from aged invoices isn’t lost forever.
The goal is to create a step-by-step collections process that starts by making smart credit-granting decisions. Make no mistake: granting credit is exactly what a business does whenever it delivers a product or service without first collecting payment.
Customers are more likely to pay quickly if and invoice arrives in a timely fashion, and is clear and simple. It should state explicitly, in itemized fashion, what it covers. It should look clean and professional, and include a company logo; cute designs may only get in the way.
Design it like a real invoice, not just a piece of paper with “amount due” typed in. Be sure it is clear to whom a check should be made out and where it should be sent. Including a return envelope can help. Also include a phone number and contact name for questions. Small business accounting programs for computers, such as QuickBooks, can easily create your invoices.
Mail invoices quickly, and send a reminder immediately if payment is not received by the stated due date. On long-term projects, consider progress billings.
If a business owner must press for collections, avoid threats or emotional appeals. Phone calls are more effective than letters or emails, according to collections experts, so contact customers directly and/or the customer’s accounting department. Be polite, yet firm in asking for immediate and full payment. If a letter is necessary, it should be personalized and sent by registered mail so that you can verify its receipt should legal action be necessary.
Collections are just one critical financial issue small businesses can face. For expert help and advice on it and other topics, contact Pottstown’s SCORE chapter online, here, or by calling 610-327-2673. SCORE is a non-profit organization of more than 10,500 volunteer business counselors who provide free, confidential business counseling and training workshops to small business owners.
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