Friday, April 02, 2010
How to get paid for the products you sell
Many business owners bemoan the situation that they have made many sales but have little money to show for them. They then continue that it takes forever to be paid for their product. When this happens, it is good to question “are my invoices going out correctly, and do they match what is on the customers purchase order?"
Professional commercial credit people call this controlling the front end of the accounts receivable. This is how you can trouble shoot like a senior commercial credit analyst and get your small company paid in a timelier manner.
When you take on a new customer, you as the small business owner need to read the purchase order. Make special note of things like freight, terms of payment, billing address, part identification numbers, and purchase order numbers. Persons not directly involved with procurement in their companies might tell your company sales personnel a great many things (well meaning), but these practices will only slow your invoices from being paid, or may get the invoice sent back to your business for correction and clarification (this restarts the payment clock). If the practice continues, this makes your accounts receivable department work harder and eventually expand, making the business less profitable! Here are some simple ideas to help your business avoid the pitfalls:
1) On freight, always offer collect the customers carrier-not pre-paid and add (this can trip an audit from the customers freight department).
2) On terms of payment, make sure they match or call the buyer to get them changed if possible.
3) On part identification numbers, make sure they match.
4) On the billing address, if this does not say attention accounts payable begin to question sales and customer service people.
5) On the purchase order, check the number to make sure it’s correct. If it is a blanket purchase order number, It will need a unique release number.
Doing these small inspections can help your small business collect its receivable more quickly. It can make your invoices go through your customer’s accounts payable with a minimum of inspection, and your accounts receivable not have to collect it. This means more profit for your business!
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