The month of renewal. The start of a new calendar year, and for many businesses, time to wrap up the corporate fiscal year.
It can be a pain, but only if you allow it to. Here are three things you can do from an Accounts Receivable management standpoint to button the books up tidily, helping your business start the new fiscal year with more gas in the tank and noticeably less dead weight holding you back from your goals.
Collect That Frustrating Debt. Don't start the new year with an AR hangover. Few things in business are more liberating than clearing old Accounts Receivable, kicking off the new fiscal year with zero old ones. If your books show aging receivables in the range of 60, 90, 120 days or more, don‘t allow yourself to dwell on the issue. Submit the lot of them to your debt collection agency. By doing so, you will immediately feel the relief of removing debt collection from your company's list of year-end tasks, while responsibly managing a significant risk factor. Once in the hands of the right professionals, the debts will be paid quickly, with no further frustration or effort from the people on your payroll. (If you are concerned about fees, here is important information for you.)
Fire 10% of Your Customers. I’m not joking. If your business is like most, the old 80/20 rule applies on both ends, meaning that just like with revenue, 80 percent of your significant problems come from 20 percent of your customer base. Of those, at least half are guilty of making work less enjoyable for your employees and pose a higher than average risk of defaulting on bill payments. By (diplomatically) cutting loose the worst ones, you’ll free up resources to pursue great customers and enable your staff to provide better service to the 20 percent that make you the most money. In many business models, and especially in the service industry, no business owner has ever regretted parting with his or her worst customers.
Resolve to Eliminate Future Bad Debt. The most effective way to minimize the cost and frustration of bad debt is by proactively avoiding it. Take a close look at the accounts that have historically been late to pay or have progressed to bad debt, and consider what could have been done to pre-empt those results. Does your contract clearly state payment terms? What does your Accounts Receivable department do to establish your company’s invoices as a top payment priority for customers?
Starting a new fiscal year should be nothing but exciting and rejuvenating.
Now is the time to set new goals that will make your business the best it’s ever been. It should feel great!
If that isn't yet the case, you are probably doing some significant but fixable things wrong. Making decisive changes right now can result in a world of difference, while setting an example that improves your business relationships while empowering and inspiring your workforce.
For more expert debt collection strategies, download our free tipsheet by clicking the link below. And plan to make this new fiscal year the best one ever!