Money & Finance
Ask SCORE                                                                        Word Count 449

Improve Your Collection Techniques

The term “receivables” is one that small business owners quickly become
familiar. This is money owed to your business. It’s a good thing, since
receivables represent sales you have made. But receivables also can
become a problem if clients are slow to pay—or worse, if they are not paying
at all.

The process of collecting money from customers is a fact of life for many
types of small or home-based businesses. But if your receivables are getting
out of hand, it might be time to come up with a strategy for improving your
collections. There are several things you can do to prevent slow payments
before they become a problem, and also to shake some money lose once
invoices have aged.

Your aim is to create a step-by-step collections process that starts by making
smart credit-granting decisions. And make no mistake: granting credit is
exactly what your business is doing whenever you deliver a product or service
without first collecting payment.

Customers are more likely to pay quickly if your invoice arrives in a timely
fashion and is clear and simple. It should state explicitly, in itemized fashion,
what it covers. Make it look clean and professional, and include your company
logo. Cute designs may only get in the way.

Design it like a real invoice, not just a piece of paper with “amount due” typed
in, and be sure it is clear how the check should be made out and where it
should be sent. Including a return envelope can help. Also include a phone
number and contact name for questions. Small business accounting programs
such as QuickBooks can easily create your invoices. Or a dedicated low-cost
software package such as MyInvoices & Estimates for $39.95 from
Avanquest can help. Visit www.avanquestusa.com.

Mail your invoices quickly and send a reminder immediately if payment is not
received by the stated due date. On long-term projects, consider progress
billings.

If you do need to press for collections, send a customized, personal letter, not
a lifeless form letter. Remind the debtor of his or her original promise to pay.
And ask for immediate and full payment. By all means, get on the phone. Most
businesses wait too long to call. But collection experts say a phone call is ten
times more effective than writing or e-mailing.

Collections are just one critical financial issue your small business can face.
For expert help and advice, contact SCORE "Counselors to America's Small
Business." SCORE is a nonprofit organization of more than 10,500 volunteer
business counselors who provide free, confidential business counseling and
training workshops to small business owners. Go to www.scoredm.org on the
web or call (515) 284-4760 between the hours of 10:00 A.M. and 3:00 P.M.
Monday through Friday.