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  • Stephen Newland

TBL #004 - Sales Matter, but Cash Is Way Better 💰

Small business owner accepting payment for coffee

An organization I worked out was having some cash issues & every single aspect of the business was being scrutinized to make things more efficient.


It didn’t take long for the light to shine on accounts receivable (A/R).


A/R is just accounting lingo for how much customers owe you.


Finance got singled out & leadership got frustrated at me because our A/R felt too high.


I see this happen in a lot of organizations, especially when cash gets tight.

The reality is it’s important to focus on A/R right now. The last thing you want to be doing is chasing money if your organization experiences a downturn in sales.


Below are three tips that I’ve learned the hard way to help manage A/R.


Assign a True Owner

Most organizations don’t have a single team or person who owns A/R. I see it time & time again.


What I mean by “owning” is having part of your performance evaluated based on A/R & following established processes.


If someone has metrics tied to it then they’ll pay much closer attention to it.


Every organization is different, but here’s been a great setup that I’ve seen work:

  • Finance owns A/R & has metrics tied to this they are responsible for

  • Sales commissions are paid when the company is paid


You’ve got two teams who are incentivized for that money to come in from the customer. 


What process can Finance follow to manage A/R?



Establish a Process & Follow It

If Finance has metrics tied to this they need a process to manage it.


It doesn’t have to be more complicated than this:

  1. Review Accounts Receivable Aging at least 1x/week

  2. Sort it so the company who owes the most is at the top of the report

  3. Go line by line with what steps can be taken this week to collect

  4. Take action


To make step 3 even easier, you can create a cadence to follow depending on how old an invoice is that a customer owes.


You'll have a better idea for what works for your business, but it could look like this:

  • 0-7 days past due - send email to customer

  • 8-15 days past due - call the customer directly

  • 16 - 30 days past due - ask the Sales rep to reach out since they’ve already established rapport with the customer

  • 31+ days past due - consider when you’d cut service to this customer


A lot of software will do automated reminders, but if it stretches out more than a couple of weeks a personal touch is likely the next best step.


Put a process in place, test it out & don't be afraid to tweak if it's not working.



Look For Patterns

Finance should be looking for patterns when they review this report weekly.


Ask questions to fix the problem at the root vs. always having to chase customers down.


Here are a few examples:

  • Are new customers often late to pay?

  • Are you making it hard for them to enter payment information?

  • Is there one company, in particular, who is always late?

  • Is there a particular type of customer that is always hard to collect from? Can you give this feedback to Sales?


Your accounts receivable aging reports can give you clues as to what’s going on at the ground level of the business.


If you can identify these it will help you 1) collect cash quicker & 2) create a better all around experience for the customer & your sales team who wants to get paid! 


The Bottom Line 💸

  • If your bookkeeping & accounting isn’t accurate then none of this is possible. Consider cleaning up your processes first.

  • Assign a clear owner of A/R in your business. If you don’t, everyone will assume someone else is staying on top of it until it becomes a necessity.

  • Reviewing your A/R aging report weekly will identify critical information about your business that may be tough to otherwise detect.


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