You are ready to start the new year off right, but there is a thorn in your side. You have a huge number of receivables on your financials. What are you going to do about that?
While the AR number keeps growing, your cash flow keeps shrinking. Receivables are the dirty little secret of every awesome financial statement, as they make profits look great but can be misleading. The cash isn’t there, and without cash not much can be accomplished in the way of running a business. Get those receivables under control this year with these strategies.
1. Evaluate Your Collections Process
How do you handle collections? Maybe it is time to consider some changes. How long do you wait before turning accounts over to a collections agency? Do you make collection calls? Maybe it is time to write off the oldest. Maybe consider selling or factoring them so that you at least get some of the cash and get them off the books. Beef up collection efforts and then turn the rest over or sell them as well. Try to keep receivables under 60 days by selling any that you do not collect by then, and do not offer credit continually to anyone that has an account that repeatedly has to be sold.
2. Maybe a Merchant Cash Advance Loan is in Order
To float the gap, if you do have paying customers that just pay slowly, consider a business cash advance. This type of small business financing ensures you get money when you need it and helps with cash flow issues from slow receivables. Keep in mind however, that the interest rates can be quite high. Carefully weigh the cost versus the benefit of this type of arrangement.
3. Evaluate Your Credit Policy
Take a look at your credit policy and see if any changes need to be made. Do you require a probation period for offering continuing credit? Is there an incentive for paying early or paying in cash? Take a look and see if your credit policy can be improved.
If you do decide to look into financing to help with your receivables, Biz2Credit can help. Our network of over 1,300 lenders can help with a variety of products to fit your needs. Visit Biz2Credit today for more information.