Inflated Accounts Receivables

Business deductions, whether valid are invalid, can be a nightmare to those who deal with commercial accounts receivables. Often such deductions as discounts , pricing and even sales tax can sit on an A/R ledger for long periods of time until they are either credited or paid back by the business customer. There are dozens of different kinds of deductions that customers take. In fact, numerous surveys have shown that more than 80% of the time deductions are valid and should be credited promptly. Some companies have systems in place that allow for a quick resolution of these items, yet in other firms (and it often varies by industry not necessarily business to business ) deductions can sit on a company’s books for as long as six months or more. The result? Inflated accounts receivables that in the long run can cost your company money. If a company’s credit line is, even in part, tied to it’s a/R, then the inflation of this current asset could adversely affect the amount that company can draw against–a thought to consider when evaluating your overall A/R status. for more information on tips check Burt & Associates in the blog section.

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Taking Control of your Accounts Receivables

Particularly in tough economic times, it’s more important than ever to keep control your accounts receivable lest they start to control you. As such, it’s important to always have in place clear credit and commercial collection policies in order to keep accounts receivables from getting out of hand. Look at your A/R listings to review your customers, their credit limits, payment terms, what their credit history is like and when’s the last time their credit limits were reviewed. With that information, credit and financial executives are in a better position to decide who to extend credit to and how much. Also, to better gauge risk, always look at a debtors’ bank and credit references, employee information and financial data. Also look at a firm’s history, who its customers are, what the competition is and how the firm is poised to face current economic conditions, especially in these times of dampened business credit markets.

KEEP COMMERCIAL ACCOUNTS FLOWING

1. Do Your Homework Before Doing Business: This is cold comfort for those struggling to squeeze a dime out of currently delinquent customers but good practice for new ones. Forward-thinking accountants can check the credit rating of a business through our burt risk scoring system while also checking references.
2. Set More Favorable Credit Terms: Stacking the deck in your favor is smart practice. One strategy is to require credit card payments; that way, the payments are predictable (i.e. you’re in control) unless the customer severs the relationship.
3. Explain Credit Terms Upfront: let your customer know that you’ll charge late fees after X number of days and then send it to commercial collection agency after Y number of weeks will be more motivated to pay on time. And requiring payment within 15 days instead of 30, offering incentives for early payment, can ensure that you’re at the top of the list for who gets paid first.
4. Use the “Velvet Hammer” Approach: Some business experts insist that treating customers as parnters can go a long way toward putting your company’s name at the top of the list when it comes time to write checks. Some even say that tacking on interest only hurts the relationship and may even backfire.

If you’re still struggling to get paid using these methods, go to www. tipsforyourbottomline.com provides some tips on how to get paid.