Best Way to Reduce Your A/R’s
by John Schuster of Caliber Law, S.C.
They often say Cash is King, and if you don’t get your receivables under control and make sure you get paid for all of your hard work, then your business cannot thrive and grow despite the fact that you have steady sales coming through the door.
When I get asked by my clients “what is the best way to handle accounts receivable?” and “what plan should I put into place to make sure I get paid?” I give them the following great tips:
1. Automatic Notices – Set up a plan for sending automatic reminders to your customers at 40, 60 and 90 days from the date of your invoice. The first step may be a simple call and reminder invoice to a customer at the 40-day mark when you have not received payment, followed by a more stern reminder on day 60 if they still have not paid. At the 90-day mark, you have generally waited long enough, and these should go out to a collection attorney.
2. Interest and Collection Fees Language – Be sure that every customer quote and contract contains both an interest penalty and costs of collection clause, as this will speed up the collection and make the customer want to pay you vs. someone else. In Wisconsin, it is sometimes not enough to simply state payment terms at the bottom of the invoice alone, so that language needs to be placed in your customer agreement. Always show the accrual of interest on all invoices as an extra motivator for a delinquent customer to pay.
3. Get Any Payment Agreement in Writing – If a customer needs additional time to pay, you need to get them under a written payment agreement that affirms the amount owed, states the timing of payments, and states other important details, such as what happens if the person defaults.
Getting paid for the products and services you provide is very important to staying in business. There are very specific rules that must be followed when collecting amounts owed, and it is suggested if your receivables get more than 90 days old, that you seek the help of a business attorney who has specific experience in business collections to help you through the process. Many times a simple letter from the right attorney can go a long way in collecting your receivables.
John W. Schuster, JD MBA is the owner and an attorney at Caliber Law, S.C., a law firm located in Oshkosh. He specializes in helping business owners start, protect, buy, sell and grow their businesses.