The truth of business is that, no matter how successful your business is, there will be good times and there will be tough times. There will be times when the business is flush with cash and times when the lack of cash on hand becomes a problem. There are many different reasons businesses run into cash flow problems. No matter how you end up there, the simple fact is when you do, you need to get cash in the door quickly to recover. When this situation occurs, you need solutions that will help you collect faster. Here are 3 ways to speed up cash collection in emergencies.
Hand Over Past Due Debt to a Collection Agency
Even if your company has a solid collections department, that is not your core business. In order to recover as much money as you can for accounts receivable that are past due and in the collections process, handing it over to a professional collections agency will help. Just as your business is good at what you specialize in, so are collection agencies. They can dedicate more time and have more experienced, skilled, persistent negotiators on staff to go after the money your business is owed. Yes, it will cost money upfront or a portion of the debt collected but that is a good trade-off to make when you need cash fast.
One thing to keep in mind when you are looking to outsource your debt collection company is that you are working with an ethical debt collection agency. Any company collecting a consumer debt is beholden to the “Consumer Credit Protection Act” and the Fair Debt Collection Practices Act. If a less than reputable debt collection agency does not follow this, you risk not getting paid and damaging the reputation of your company.
Reward Early Payments, Penalize Late Ones
Going after clients who are past is one side of the equations. The other side is working to incentivizing clients to pay early and penalize those who pay late (this is for customers who are late but not delinquent). Especially for customers who are diligent about paying their bills on time, offering a small percentage discount or other perks for early payment may be something they are keen to take advantage of.
On the other hand, for those clients who are always paying late and do not seem to make a move until you politely “remind” them a few times about their bill, you may want to consider taking slightly harsher actions and charge a fee for late payments. This is a valuable tool because it can either get you some more money when they eventually pay, or you can waive it for the customer as long as they pay immediately. That will help get the money in much quicker. Finally, if you have customers that are consistently behind on payments, you may consider dropping them. Sometimes it is just not worth it.
Bill Better, Bill Faster
By streamlining the billing process, you will be able to get money in the door quicker all the time which will hopefully lead to fewer emergency situations to begin with. You want to make sure that bills are going out promptly, either when goods are shipped or service is provided. If you are on a billing cycle, you can speed that up too. If bills generally go out every month or two weeks, change it up to every week. The simple adage to keep in mind is that you cannot collect on what you have not billed.
One of the best ways to do this is to switch to an online or automated billing system. With these types of systems, bills go out and are followed up on automatically so there is less room for human error or oversight. The added benefit for this is that most of these systems come with online payment portals as well. If you do not have to wait for a check to be mailed or picked up the money will hit your coffers much quicker.
When times are tough in business, the main focus needs to be getting cash in so you have the working capital you need to function properly. By following these 3 tips, you should be able to get cash in immediately to help the situation. These strategies also will be beneficial for the long-term health of your business because they will speed up your accounts receivable process so you do not get in as many tight situations in the future.