It’s
tempting to be overly optimistic about the level of revenue your business will
bring in, but the realities of your revenue stream may create an altogether
different picture.
Revenues
are unpredictable, and taking steps to handle your revenue stream is vital to
your business success. Sales drive your quarterly budget—but revenue is the
result of sales. And experts say small businesses are susceptible to losing
between 2 percent and 20 percent of their revenue. So how do you minimize these
losses?
One
critical area is tackling problems with delinquent payments. When making a
sale, do you communicate clearly with the customer as to the payment terms, so
he or she knows exactly when the bill must be paid in full? Are you requiring
at least partial payment before you ship an entire order or complete a project
or service? If not, you may find it’s difficult to collect after the fact.
How do your
customers pay? If you accept checks, do you have a solid check acceptance
policy—one that your employees understand and is clearly posted for the benefit
of your customers? If you receive a substantial number of checks for
transactions, seriously consider engaging a check-verification service. An
electronic check reader scans the check and runs information through a database
to screen out names of individuals who previously have written bad checks.
Even if you
are vigilant in managing collections, human or computer error can create
apparent sales shortages. Sometimes sales are not written up correctly due to
pricing or calculation errors, causing a customer to be under-charged. You must
also monitor if bills are not going out to customers in a timely manner, for
example, if a purchase order changes hands, from a salesperson to the employee
responsible for billing. It pays to establish, enforce and perform quality
control on the process by which sales information gets captured, recorded and billed.
Consider
making a collection file for each of your customers. It should contain their
credit information, unpaid invoices, complete information on the services or
products delivered to the customer, and any correspondence with respect to the
debt payment. In a worst-case scenario, you may have to engage an attorney or a
collection agency to get payment from a delinquent customer, so complete files
will work to your advantage.
For more
information about sound cash management, contact SCORE® “Counselors to