Your AR is your cash in
someone else's bank account.
As
a management consultant I see many different businesses but
in most cases the problems are the same. In the over 50
clients I worked with over the past three years, not one did
not have a problem with accounts receivable (AR). The
common response to the question was "They are such a good
customer, we don't want to upset them."
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Your AR is Your Cash in Someone
Else's Bank Account
As a management consultant I see many different businesses
but in most cases the problems are the same. In the over 50 clients I worked
with over the past three years, not one did not have a problem with accounts
receivable (AR). (Receivables are those invoices for work or services you have
performed or delivered, but have not yet been paid.) The common response to the
question was "They are such a good customer, we don't want to upset them."
My response to that is "Why should it upset them if you ask for your money". But
be that as it may, the real issue is that getting paid is part of the job. It is
part of customer service and if it is viewed that way it is so much easier. The
key therefore is not to wait till an invoice is past due, by then it is getting
too late. Before due date make a customer service call and ensure there are no
problems.
If you do that, when the invoice becomes due, there are no excuses for it not to
be paid.
One thing that may change business owner's attitude would be if accountants
change the way they deal with bad receivables. Most often it is deducted from
the top line - sales, giving the impression it is just another sale not done. It
would be better if it went right down to the bottom line and be deducted from
profit. The result is the same, but it reinforces the truth that a bad debt
comes right out of the owners back pocket.
Operating an effective AR program will reduce your loss from bad receivables,
but sometimes you get the people who appear to have the money but just won't
pay. Once you have tried everything else and failed, you can get a small
satisfaction. The Internal Revenue Service consider discharged debt as taxable
income to the individual who gains economic benefit from it.
So what you do is inform the debtor that the money they owe will be reported to
the IRS in the form of a 1099-Misc. and it will be their responsibility to pay
the appropriate taxes. Often this brings a speedy response.
The Author
After 25 years consulting to small and medium sized
companies,
Mike Anderson,
principal of
Train Me To Be a CEO
realized that the most important part of his work was
training the CEO, and the reason he was such a good
consultant was that he did that very well.
Trained as an engineer, he became a CEO of a midsize
corporation at the age of 35. After a spell at Harvard
Business School he entered the world of consulting.
3. Ongoing mentorship. Begins with a
minimum two day one on one, but continues with monthly or quarterly follow up sessions. (Smart
and probably Best!)
.
References
A New England Contractor
"Mike Anderson has been working diligently with the upper
management team at (our firm). Mike is
extremely knowledgeable and has an exceptional way of
dealing with many different personalities. He has worked
very closely with the Sales Team to impress upon them the
importance of using a consistent method of estimating. He
was instrumental in restructuring our accounting procedures."
