What once moved like clockwork is now more erratic and unpredictable. Sometimes it happens subtly, but it’s happening everywhere: Payments are slowing down, and uncollected receivables are piling up on companies’ balance sheets.
For example, accountants in the business office of a manufacturing company noticed about six months ago that payments from its biggest customer had slowed from a dependable 25 days after invoicing and were now taking 45 days.
Multiply that manufacturer’s situation by millions and we can see the dimensions of this problem.
Companies across America, of all types and sizes, are having problems collecting from their customers. Business owners and managers must recognize the need, especially in these troubled times, to do business differently, to collect receivables faster and to manage cash more efficiently.
First, companies can gain valuable insights by checking in with their team of key advisors — with their accountants, bankers and attorneys. Discussing economic and market trends and financial issues can help prevent serious problems.
Then, it’s important to analyze the receivables situation systematically, investigating customer by customer why payments are late. Reaching out by phone to late-payers can provide useful information, but this must be done diplomatically to protect important relationships and avoid alienating customers.
Perhaps the customer is experiencing financial hardship, or perhaps they have simply determined that the company doesn’t need to pay within 25 days and are taking advantage of an extra time cushion by stretching out payments. A phone conversation can help both companies understand what’s happening and what needs to be done. Also, it’s an opportunity to reinforce the power of the invoice, simply letting the customer know you want to be paid and are closely monitoring the situation.
Companies often turn to their bankers for advice concerning late receivables, such as when to call customers to ask for payments, whether to offer discounts to fast payers or to contact a collection agency to pursue slow ones. Bankers can also direct companies to efficient and secure cash management tools. Using those tools is relatively straightforward but may require rethinking old habits. Many small businesses have not modernized their billing systems in decades and handle receivables, payables and payroll using only a calculator, a notebook and a pencil. Additionally, many small business owners pay bills as soon as they receive them.
These entrenched habits may also keep a company from using helpful tools. Companies that are not using a computerized billing system with online banking interfaces, accepting credit cards, borrowing through lines of credit, or using automated clearing house (ACH) services or remote deposit may be missing opportunities to speed up collections of receivables. All these tools can help keep companies solvent, despite the challenge of slow receivables amid today’s general economic downturn. Here are some ideas for expediting collections.
Computerized billing systems can be very effective, especially when used with online banking. These days, most small companies use either business software systems such as industry-specific specialized billing software, for instance the software medical practices use to bill Medicaid and Medicare. Banks’ online banking systems interface easily with most billing software, tracking receivables accurately and providing efficient ways to collect. The better online banking systems combine convenience with security, for example, allowing a desktop screen shot of all accounts at once.
Companies can speed up collections by accepting credit cards, although some companies resist, seeking to avoid paying fees. However, the attraction of assured payment from customers may overcome that reluctance. Customers may be grateful to pay by credit card, too; because this allows them to maintain good relationships with suppliers while gaining additional time to pay.
When the collection of receivables slows, some companies turn to their banks for a line of credit; some can be connected directly to a company’s checking account. This allows a company to make payments to its suppliers even when its accounts are low; when the company makes a deposit into the account, it can replenish the line of credit.
ACH services may seem to be a high-tech method for collecting receivables, but even small businesses are using them in growing numbers these days. ACH services can be set up to debit customers’ accounts automatically, and they can be custom-tailored to bill customers according to the needs and operations of those customers and to the common payment methods (progress payments, or payment all at once) in their industries.
Remote deposit allows companies to take maximum advantage of float, scanning checks from customers as soon as they arrive by mail, instantly depositing them via the Internet, and being able to access cash quickly.
For large companies that export their products overseas, online banking can ease international operations through foreign exchange services. But even for small businesses whose customer bases are measured in blocks rather than continents, expediting the collection of receivables is crucial in these economically troubled times, and it is a task that the efficient use of online banking and other tools can facilitate.Steven Gagnon is a senior vice president and oversees KeyBank’s Business Banking in Maine. His office is at 480 Main Street in Presque Isle, and he may be reached at:
For example, accountants in the business office of a manufacturing company noticed about six months ago that payments from its biggest customer had slowed from a dependable 25 days after invoicing and were now taking 45 days.
Multiply that manufacturer’s situation by millions and we can see the dimensions of this problem.
Companies across America, of all types and sizes, are having problems collecting from their customers. Business owners and managers must recognize the need, especially in these troubled times, to do business differently, to collect receivables faster and to manage cash more efficiently.
First, companies can gain valuable insights by checking in with their team of key advisors — with their accountants, bankers and attorneys. Discussing economic and market trends and financial issues can help prevent serious problems.
Then, it’s important to analyze the receivables situation systematically, investigating customer by customer why payments are late. Reaching out by phone to late-payers can provide useful information, but this must be done diplomatically to protect important relationships and avoid alienating customers.
Perhaps the customer is experiencing financial hardship, or perhaps they have simply determined that the company doesn’t need to pay within 25 days and are taking advantage of an extra time cushion by stretching out payments. A phone conversation can help both companies understand what’s happening and what needs to be done. Also, it’s an opportunity to reinforce the power of the invoice, simply letting the customer know you want to be paid and are closely monitoring the situation.
Companies often turn to their bankers for advice concerning late receivables, such as when to call customers to ask for payments, whether to offer discounts to fast payers or to contact a collection agency to pursue slow ones. Bankers can also direct companies to efficient and secure cash management tools. Using those tools is relatively straightforward but may require rethinking old habits. Many small businesses have not modernized their billing systems in decades and handle receivables, payables and payroll using only a calculator, a notebook and a pencil. Additionally, many small business owners pay bills as soon as they receive them.
These entrenched habits may also keep a company from using helpful tools. Companies that are not using a computerized billing system with online banking interfaces, accepting credit cards, borrowing through lines of credit, or using automated clearing house (ACH) services or remote deposit may be missing opportunities to speed up collections of receivables. All these tools can help keep companies solvent, despite the challenge of slow receivables amid today’s general economic downturn. Here are some ideas for expediting collections.
Computerized billing systems can be very effective, especially when used with online banking. These days, most small companies use either business software systems such as industry-specific specialized billing software, for instance the software medical practices use to bill Medicaid and Medicare. Banks’ online banking systems interface easily with most billing software, tracking receivables accurately and providing efficient ways to collect. The better online banking systems combine convenience with security, for example, allowing a desktop screen shot of all accounts at once.
Companies can speed up collections by accepting credit cards, although some companies resist, seeking to avoid paying fees. However, the attraction of assured payment from customers may overcome that reluctance. Customers may be grateful to pay by credit card, too; because this allows them to maintain good relationships with suppliers while gaining additional time to pay.
When the collection of receivables slows, some companies turn to their banks for a line of credit; some can be connected directly to a company’s checking account. This allows a company to make payments to its suppliers even when its accounts are low; when the company makes a deposit into the account, it can replenish the line of credit.
ACH services may seem to be a high-tech method for collecting receivables, but even small businesses are using them in growing numbers these days. ACH services can be set up to debit customers’ accounts automatically, and they can be custom-tailored to bill customers according to the needs and operations of those customers and to the common payment methods (progress payments, or payment all at once) in their industries.
Remote deposit allows companies to take maximum advantage of float, scanning checks from customers as soon as they arrive by mail, instantly depositing them via the Internet, and being able to access cash quickly.
For large companies that export their products overseas, online banking can ease international operations through foreign exchange services. But even for small businesses whose customer bases are measured in blocks rather than continents, expediting the collection of receivables is crucial in these economically troubled times, and it is a task that the efficient use of online banking and other tools can facilitate.Steven Gagnon is a senior vice president and oversees KeyBank’s Business Banking in Maine. His office is at 480 Main Street in Presque Isle, and he may be reached at:
Steven_L_Gagnon@KeyBank.com or 764-9419.
