6 Tips To Improve Your Cash Collection
Collecting money from customers can be challenging. To ensure those sales become cash in the bank, consider the following as it relates to your company’s process:
1. Who are you?
First, take the time to observe your business: who are your customers? how many are there? what kind or relationship do you have with them? how many invoices do you issue annually? A company that sells canned food could have the same turnover as a construction company, but they are so different!
2. Identify the reason for late or non-payment.
Analyze your Account Receivable aging report to assess the current situation. Why do you have these difficulties? It could be linked to the quality of your products, invoicing errors, a lack of background check on new customers … A quick survey will give you an idea of what the issues are.
3. Map your current process
Now you can focus on your process: do you send paper reminders? emails? when? do you keep track of your collection activity? at what point do you call the customer? what do you say? who in your company is involved in this process? do you reconcile with your main customers? create a roadmap of each step to assess improvements that can be made to the current process. Work with Penon Partner consultants to get clear and detailed business process maps.
4. Define your new process – test it – improve it
This step will help you create and write your new policy. It should be clear and precise, with different methods for different levels, and a script for each of them. You should also assess the credit management tools that you need: a new software, a development in your ERP, automatic payment systems, a subscription to a credit insurance policy or collection agency…
5. Consider all aspects
You need to consider other aspects: HR for instance. You may need to enhance your team’s communication skills and increase their motivation to get cash in. It is also a good idea to involve other departments like customer service and the sales department that are regularly in contact with your customers.
6. Set up KPI’s
Last but not least: set up a monthly KPI and share it with all parties involved, this will keep them motivated and will enable process assessment and continuous improvement.
Penon Partners has been supporting and executing cash collection process improvements for many companies. Let’s figure this out together !
Written by Carole Devies, firstname.lastname@example.org, Practice Leader – Financial Transformation Consulting at Penon Partners
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