by
Philip Campbell, CPA
Copyright
2004, Philip Campbell - All Rights Reserved
Making a sale is very important. But collecting the
money for the sale is even more important. It does not do any good to
sell a product if you don’t collect your money.
In fact, you can ruin a business real fast if you
neglect the all-important step of making sure you are collecting the money
for what you sell.
I had the President of a national association of
small business owners tell me a story about one of their members that
really highlights this point.
One of their members started a service business
catering to large health care institutions.
She would provide a trained staff of people to
perform services that the institution would otherwise have to hire
employees to perform. She provided a turnkey service that would help
improve the service levels while at the same time save the institution
money.
After she got her first contract, she began the
process of recruiting, interviewing, hiring, creating an extensive
training program, training the new hires, etc.
This took about three months to complete.
After her team was in place and trained, they began
providing the service. She sent her invoice to the institution after the
first month of services had been provided. After a couple months went by
she got a really big surprise.
It turns out this institution held invoices from
suppliers for at least 120 days before they paid them. In fact, it was
somewhat of an industry practice. She
was now almost seven months into her new business and she had not even
collected the first dollar of revenue.
She had been spending money all this time not
realizing there would be this huge delay in actually collecting her money.
Unfortunately, she ran out of cash.
When she started
the business she thought she would be able to get everything going faster
and she thought she would be able to do it a little cheaper.
But the really big surprise came when she realized
the hard way that creating a sale and collecting the cash doesn’t always
happen at the same time.
A Sale is Not a Sale
Until the Cash Is Collected
I worked with another business owner who had
recently sold about $18,000 of merchandise to two different commercial
accounts. He had basically hit a home run by winning these two new
commercial accounts.
He was feeling really good about the sales and about
finally breaking into this untapped market.
And his income statement looked really good in the
month he made the sales. In fact, it showed he had the best month in the
store’s history.
What he had not realized until now was that these
sales were actually hurting his cash flow.
Not only had he never collected the $18,000, he had
already paid for the inventory he sold them.
To make matters worse, this uncollected sale was
happening at a time of the year when he could least afford to be without
the cash. The sale looked good in the income statement, but not so good in
his cash flow.
The Key is to Manage
Accounts Receivable Closely
He learned a very important lesson about
selling to commercial accounts.
He learned that selling something and
collecting the money are two different things. He created new standards
for how these sales would be handled in the future.
Each invoice for a commercial sale would have a
specific due date on it.
He began talking to his commercial customers about
his terms very early in the selling process. Having this worked into the
selling process early on helped him make sure his invoice would get
processed timely once it was sent to the company.
He also decided to begin a proactive process for
calling to check the status of an invoice within seven days of sending it.
He would have his bookkeeper make frequent calls to
check status of any outstanding invoices so he could aggressively work
outstanding invoices before they could become a problem.
He also planned to make sure he understood the full
cash flow impact of accepting large orders.
He now recognized that it was very important to know
that you have sufficient cash flow to handle the up-front cash commitment
required to take on a big new order from a customer.
Make Sure You Get Paid
What is Owed You
If you invoice your customers, you have no choice but
to make sure you actually get paid for every dollar you invoice.
You must make this is one of your highest priorities
so that you get paid every dollar that is due to you.
This is a critical aspect of your business that you can’t afford
to ignore.
If you would like to learn more about taking control of
your cash flow, get this FREE
Special Report "The Secret to Understanding Your Cash Flow" Click
Here.
This Special Report
is FREE for a limited time.
Learn the secret to regaining
control of the financial side of your business. Get
your FREE Special Report NOW.
About Philip Campbell
Philip Campbell is a CPA, and the author of the book
“NEVER RUN OUT OF CASH,
The 10 Cash Flow Rules You Can't Afford to Ignore”.
Philip has helped hundreds of business owners take
control of their cash flow.
He shows you how to eliminate your cash flow worries and
take control of your business.
Is your cash flow under control?
Click
Here to learn more - NOW.
*** Web Site Owners and Newsletter Editors ***
You may publish this article in its
entirety in your newsletter or on your web site as long as you leave all
links in place, do not modify the content and include my resource box at
the end of the article.
You can get a text version of this
article by sending a blank email to: accountsreceivable@sendfree.com.
If you would like to publish any other
articles I have written, send a blank email to: mailto:articlesfromphilip@sendfree.com.
I will notify you when each article is
released.
Experience
the Wonderful Feeling of Having
Your Cash Flow Under Control!
Get your copy of Never Run
Out of Cash
If you have friends or associates who could benefit from
taking control of their cash flow - please click the link below. This page
will be sent to them with a brief message from you.
(no email addresses are retained in this process)
Send
This Page To a Friend
|
