A receivable is only a valuable asset if you collect upon it!

Accounting=Human Sacrifice

Image by rococohobo via Flickr

Receivables are the lifeblood of business, an indication of business performed- but only if you collect.  As such, it is critical that receivables are RECEIVED.  If you are manufacturer, invoices go out with the product.  If you provide services, invoices go out as soon as a milestone is achieved.  Invoices get paid when the client/customer sees the direct link between the invoice and value received.

Another critical factor to collecting receivables is understanding when/how your client/customer pays invoices.  Do they pay every week?  Do they pay monthly?  Time your invoice to arrive at least four days before processing is effected.

Obviously, your invoice must provide a description that matches the verbiage the customer/client employs for ordering your product.  If you customer orders a widget to fix toilets, an invoice for part 12093 with no explanation will not necessarily get your invoice paid. If you widget can fix toilets, transmissions, and airplanes, either use all three terms or give a better explanation still.

In today’s economies, many establishments have “extended” their payment policies to 45 days.  Make sure your client/customer understands why that is unacceptable to you- AT THE OUTSET; inform them that there is a discount for payment in ten days or a non-negotiable surcharge for payments received after 30 days.

The other key point to recognize is that all unpaid invoices (What? We are not always paid on time?) require reminders on the day they are due- or even on the 11th day, if a discount were offered for prompt payment.

And, if your business has long term projects (like we do), there are two possibilities.

  • For a one year, $100,000 project, we receive a retainer of $ 6,000 on the first day of the month; a progress invoice is sent out on the 15th of each month, with detailed explanations.  Any additional effort is due and payable with the next retainer.
  • For smaller duration projects (let’s use the same value for this example), we would take a $ 10,000 retainer.  Then, at each milestone, we send a detailed invoice that requires payment within ten days.
  • In either case, an untimely payment means we stop work; there is also a penalty imposed for this stoppage.  Nonpayment means the loss of confidentiality for all work performed.
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About RAAckerman@Cerebrations.biz

A polymath whose interests span chemical engineering, medicine, biotechnology, business, management, among other areas. Among my inventions/developments: dialyzer, dialysate, neurosurgical drill, respiratory inspirometer, colon electrolyte lavages, urinary catheters, cardiac catheters, water reuse systems, drinking water system, ammonia degrading microbes, toxic chemical reduction via microbes, onsite waste water treatment, electronic health care information systems, bookkeeping and accounting programs, among others.
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5 Responses to A receivable is only a valuable asset if you collect upon it!

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