Apr 102009

This episode of CashFlow ABC is on effective AR management. 

Accounts Receivable is one of the largest components of working capital for most companies, and the one most easily turned into cash. 

We highlight and discuss the essentials to maximize your current and future cash flow through accounts receivable.

1.  Measure, analyze, improve
   a. If you don’t measure, it won’t improve
   b. Accountability & incentives
   c. Cash flow from operations
   d. Percentage past due
   e. Dollars past due

2.  Tools
    a. Spreadsheet
    b. Graphs
    c. Credit policy
       i.   Credit application
       ii.  Personal guarantee
       iii.  Credit checks
       iv.  Credit limits

2A.  AR Management Bundle

3.  Develop a process
      a. Pro-active calling
      b. Past due calling
      c. Credit hold
      d. COD/CIA
      e. Positive cash flow
      f.  Prompt pay discounts
      g.  Records & notes
      h. Letter writing services
      j. Collection agencies
            i. Commission goes up with age

4.  Risk management
      a.  Credit limits
      b.  Credit insurance
      b.  UCC filings
      c.  Consignment
            i.   Doesn’t belong in risk management
            ii.  Increased risk limited to stock value
            iii.  Increased sales
            iv. Leverage for UCC filing
      d.  New customers
            i.   Customers fleeing their past due accts
            ii.   Financials
            iv.  Do they use asset based lending or factoring?

5.  Customer relations
      a.  Think win/win
      b.  Positive cash flow
      c.  No news is not good news
      d.  Little things matter

We welcome your comments and participation.

– John

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