(Part Two Of Three)

HAVE A SUPER TIGHT ACCOUNTS
RECEIVABLE POLICY

Many people think it is no big deal to neglect accounts receivable until
bills are collectible. This is bad cash flow policy. Here are seven
excellent tips for handling accounts receivable:

(1) Check the financial health of a new customer before offering them
credit. One way of doing this is by using a rating service, such as Dun &
Bradstreet (1-800-234-3867).

(2) Ask a new customer for five business references and don’t neglect to
call them.

(3) Don’t offer too generous discounts, such as 3% for payment in 10 days.
A better rate is 1.5% cash discount. It costs you less.

(4) Charge a “late fee” of 2% per month to customers who pay late and
charge back customers who take discounts after the discount periods.

(5) Follow up on late payers with phone calls and letters. These may seem
a bit extreme, but the first letter should go out the very day the amount
is one day late! After 30 days late, start this sequence:

— send out a letter from your attorney
–turn over the account to a collection agency
–use a collection attorney

(6) Don’t send out new merchandise if bills remain unpaid. Remember that
bad debts hurt your bottom line! Be vigilant and try to get at least
periodic payments from slow payers.

(7) Instruct your bank to automatically deposit “returned checks.” Ask
your bank if they offer Return Item box service. If they do, then use it
to redeposit your check and charge back the bank return item free to your
customer.

These seven steps are tough and unrelenting, but they may make the
difference between a positive cash flow month and a sluggish month for your
business.
It may seem a bit hypocritical to demand swift and exacting payment, and
then do what we suggest next. But just remind yourself, all (almost) is
fair in love and war and business.

DISBURSE YOUR MONEY SLOWLY

Just the opposite of collecting at the earliest possible moment, you should
never pay a day sooner than you have to, unless you get a discount for
doing so. A lot of people believe in staying ahead of bills and paying
them as early as possible, but that’s just poor cash management. You want
to keep your money in your hands as long as you can. Here are five
suggestions to slow down your disbursements:

(1) Pay your invoices on the last day they’re due, not before.

(2) try to mail your payment on Thursday or Friday to pick up a few extra
days mail float over the weekend.

(3) Use business credit cards for travel, lodging, meals, and small
expenses for yourself and your employees. With credit cards you typically
don;t have to make payment until 25 days after receiving the statement.
Use this float by investing the money. In total, you can typically keep
your money invested for 45 days from date of purchase.

(4) Don’t issue advances to employees. Have them use their personal credit
cards or business cards, if you provide them

(5) Consider setting up a remote disbursement checking account in another
state to extend the check clearing float by at least a day. This practice
is used very successfully by 17% of large companies. The downside of this
practice is that some vendors may complain about their delayed availability
on their bank deposit. But this can be overcome by mailing them their
checks one day earlier.

Now, many small businesses neglect to reconcile their monthly bank
statements or assume that the bank never makes a mistake. Banks do make
mistakes, and you must stay on top of your disbursement to control your
cash flow. If you are one of those people who simply can’t stand to
balance you check book, you can use a bank’s standard account reconcilement
services for a low monthly price — $30 to $70 base charge and 5 to 7
cents a check. When is it best to use a bank’s reconcilement service?
Here are six suggestions:

(1) When you have a monthly check volume of at least 500 checks.

(2) When you need specialized reports.

(3) When you are currently performing your own reconcilement.

(4) You can find software at a reasonable price that meets your needs.
Manufacturer: Accpac
Model: 102160180900
Media Format: CD-ROM about $40.00 with shipping

(5) When you don’t have your own PC or any other kind of computer system.
(We already warned you about that).

(6) When you have no staff to do it, or time to do it yourself.

Sadac Israel and IIM