Featured Coaching Training: 7 Proven Principles for Managing Your Accounts Receivable
Too many small business owners continue to extend credit to customers who are late on paying their bills. This series will outline some of the best principles for managing accounts receivable effectively.
Featured Coaching Excerpt - Notes & Transcript, Part 1
Lesson Nugget: Unless your core business is the finance business you simply are not in the finance business and cannot afford to dabble there either.
Lesson Nugget: It’s hard to deposit I.O.U. notes at the bank, you must collect that cash.
Lesson Nugget: Make the choice early and often to invoice or you will have skinny team members.
Lesson Nugget: Your linebacker and your kicker probably should not switch positions if you want to win.
Lesson Nugget: Dancing in the dark may be fun, but collecting in the dark is a lot like playing “Spin the Bottle” when Jabba the Hut is in the room.
Lesson Nugget: You cannot manage what you do not measure. Measure what you treasure and keep your accounts receivable under control.
Lesson Nugget: Don’t extend payment terms to every charity case client or you will end up robbing Peter to pay Paul.
- Okay, so we've covered the seven principles specifically for managing your accounts receivable.
- [Clay] True.
- And Clay, I wanna go back through all of them, make sure that we have a lot of really good lesson nuggets for all the Thrivers today.
- How about this, we're gonna do like Run-D.M.C. style, we do that occasionally.
- [Marshall] Okay, yeah.
- You go ahead and fire off the principle, I will fire off the nugget.
- [Marshall] Okay.
- I'm learning this language.
- Run-D.M.C. style, here we go. So principle number one, you are not a bank.
- Unless your core business is the finance business, you simply are not in the finance business and cannot afford to dabble there either. Thrivers, quit screwing around, quit being a bank. Find a third party banking solution like a CareCredit if you're a doctor, or a Synchrony Bank, or some sort of third party lender, or maybe your customers are aware of credit cards, maybe they can borrow money from their uncle, but not from you, stop becoming a bank unless you're in the banking business.
- Principle number two, collect that cash.
- It's hard to use an IOU note, you know like a little Post-it note, IOU, to deposit stuff at the bank. It's hard to use an IOU to deposit money at the bank. They won't accept it, you can't go buy things with IOUs, unless you're Greece. Greece, I ain't mad at you, but you guys are screwing up.
- Principle number three, invoice early and invoice often.
- You gotta make the choice early, you know to invoice early, and to invoice often. If you are the kind of person who has to invoice, the day you render that service, baby, get that invoice out of there. Get that invoice out as soon as you possibly can. Just last week some jerks, did they not do it?
- [Marshall] Mm-hm.
- Oh yeah, they come to town, yeah we're here to work with you guys. "Oh, Art, we didn't get an invoice. "Oh, and then we won't pay you until "30 days after we get the invoice." Okay, so here's the invoice right now. "Oh, and it has to be mailed, "and signed, and..." Ehhh! And if that's you, you know who you are.
- Principle number four, don't delegate debt collection to passive people.
- Yeah, I mean, this is just huge, I wanna make sure we're getting this. Your linebacker and kicker probably should not switch positions if you wanna win a football game. You don't want, look, it's our really great former soccer player but not good enough to play pro soccer who's now a kicker. Let's have him play linebacker this game and see what happens. No, don't do it, you just get the right people on the right seat on the right bus.
- Principle number five, fastidiously determine who owes you.
- Well, this is a funny little nugget here for you, but it's important. Dancing in the dark may be fun, but collecting in the dark is a lot like playing spin-the-bottle when Jabba the Hutt is in the room.
- [Marshall] Mmm.
- What am I talking about? What I'm talking about is that you have to know who owes you money, you gotta know who doesn't, otherwise you're gonna have a very unpleasant surprise.
- Principle number six, don't let your accounts receivable become unbelievable.
- You cannot manage what you cannot measure, okay. You have to measure what you treasure, you gotta measure what you treasure, and keep your accounts receivable under control. You gotta measure what you treasure, and keep your accounts receivable under control.
- And principle number seven, collect fast or you're kicking your own...
- Hey! Now here's a lesson nugget, don't extend payment terms to every charity case or client, you're gonna end up robbing Peter to pay Paul. Don't do it, I see it all the time, I see good people reduced to chronic check bouncers because they're extending credit to customers. If you extend credit to customers that you can't do, now you have to do what, bounce your payroll checks, can't take care of what you promised to do, so you're just creating a problem. You've got to stop the line, and if people get upset about it, it's their issue, it's not yours.
- So Clay, thank you so much for diving into all of these accounts receivable principles here.
- [Clay] Yeah.
- I really do think that this is one of the most important trainings for the Thrivers here, and help get them on the right track for their accounting.
- I just wanna share this, we had a Thriver I talked to yesterday, and a neat neat guy. He knows about Thrive because his pastor at his church told him about Thrive. And the pastor knows about it because his friend knows about it. And I would just ask all the Thrivers listening right now, tell your friends, if you have a friend who needs to know this, share it with them. And remember, the workshops are included in your $19.99 a month, so get out here, come to a workshop if you need help, we're here to help you, that's what we do. Okay there's no upsell, no scammy-scam going on. We're excited to help you guys, and we just wanna thank you so much, and see if we can collect all that cash as soon as possible.
- Thrivers, we will see you next time.
- George Michael.
- George Michael.