Friday, May 2, 2014

Accounts receivable

     Free daily advice for people in small business
     from someone who has been there, done that.

     Many small businesses sell to other businesses, companies, corporations and other big time operators. 

     You work hard to get these accounts. And you work even harder to keep them happy.

     Getting paid, however, can become a problem with big accounts. They frequently don't pay on time.

     I once had a serious conversation with a senior vice president at a major corporation about this. His company was three months in arrears and still ordering. Exasperated, I blurted out that I was not in the business of financing his company. That was it. I had put my finger on the problem in a way that he understood. By continuing to furnish his company the materials they ordered from me, and, at the same time, not being paid in a timely manner, I was providing financing. 

     In a very small way, my small business was acting like a bank for his corporation. Big companies do this all the time with their small suppliers. 

     If you are having a similar problem, consider trying one of these solutions. 

     1. Change your terms. Offer a 2% discount for payment within a short period of time (10 days, 30 days, or whatever you decide). When invoices arrive at a big company's accounts payable department, those offering discounts get attention right away. It's a way of prioritizing your invoice in their system.

     2. Set up progress payments. If you are providing a service based on significant inputs of labor/materials, set up contractual milestones that trigger partial payments on the overall project. As project phases are completed, send the appropriate invoice, referencing the negotiated contract.

     3. When dealing with a buyer who is "lost" in the corporate structure of a big company, it's useful to develop a close and continuing relationship. A face-to-face conversation about timely payments will frequently get positive results. Key here is the relationship you develop.

     Small businesses that sell to big companies have a valued customer. But the relationship must be carefully nurtured and managed--particularly with regard to accounts receivable.

     Questions? Email me direct at AlWarr16@gmail.com and put BLOG in the subject line.
     I am retired and I am not selling anything. Your privacy always respected.

      

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