Collecting payment is as important as making the sale
Cash is the lifeblood of a business. Without it, businesses die. In the early stages of your business, you may be happy just to make a sale, any sale. But the sale is only part of the cycle, which continues with the delivery of goods or services and collecting payment. Collecting cash is a significant part of the cycle. Don't leave it for last.
When possible, get money up front. Have a written policy requiring customers to pay you a deposit. Post the policy next to the cash register or receptionist's desk so that customers readily see it. If a customer refuses to pay a deposit, let him walk out the door.
You should have a written policy regarding cash collection from customers, including specific time lines and consequences if payment is not received, Be sure your employees know the policies and enforce them. There should be no exceptions.
There is an unwritten rule in business that invoices (bills) can be held 30 days before being paid. It's not uncommon for larger companies to hold bills six weeks before paying. In light of this, you should bill customers as soon as possible,
Make it easy for customers to pay you. When you accept credit cards, most people won't think twice about paying. They'll give you the plastic card and be done with it. It generally shouldn't matter to you whether goods are purchased using a credit card, check, or cash.
What matters is that you get paid. Credit cards cost about 2 percent of the amount of the sale. A $100 sale paid for using a credit card, for instance, will net your business $98 (the other $2 for bricks and mortar stores- online is a bit higher, will go to the credit card company).
Always mail monthly statements to your customers, For customers with balances that are more than 30 dap past due, stamp "Overdue" on the statement, while there are many accounting software programs that enable users to email statements to customers, I wouldn't recommend them. Use snail mail.
It is much harder to ignore a statement when you have that physical paper in your hand and it has a big red "Overdue" stamp on it. The same goes for invoices.
After the sale, you might consider follow-up calls to your customers, especially if they owe you money. On such occasions, you can make certain your customers are satisfied, thank them for doing business with you, and seek their referrals before reminding them of your payment policy.
And finally, you can't be Mr. Nice Guy when it comes to collecting cash. Firmly set your policies, stick to them, and enforce them. Only then will you be able to collect payments on all those sales that you worked so hard to make.
About the author
Armando G. Roman CPA/PFS MBA has more than 25 years of experience providing clients with advice and counsel regarding financial matters and their monies. Mr. Roman speaks fluent Spanish and is a former columnist for La Opinion, the nations largest Spanish-language daily newspaper. He is the incoming chairman of the board of directors of the Arizona Society of Certified Public Accountants, chairman of the Audit Committee of Maricopa Integrated Health Systems, and a board director of the Arizona Hispanic Chamber of Commerce. He lives in Paradise Valley, Arizona, with his wife and three children. He can be reached at email@example.com