Finally, nearly all collections experts agree that companies should discontinue credit to customers who regularly pay their invoices late. By calculating the interest paid on products sold to these late-paying customers, and subtracting it from the profits of those sales, it can be determined if a customer is worth keeping.
Conclusion
Tightening A/R turnover is a must for any company, large or small, but for smaller produce companies, it will help ensure continued success. As Prues puts it, “Collecting as quickly as possible helps improve overall cash flow—and in turn allows us to pay our suppliers quicker.”
Rodriguez sums it up by saying, “It is essential to collect receivables quickly to keep the company cash flow goals.” If money is not flowing in, “there might not be enough resources to keep up with company obligations.”
Staying on top of A/R is critical, but also understanding how customers are performing with other vendors is essential, not only for taking appropriate action, but for making more informed decisions as they relate to improving A/R turnover.
Ratings and scores should be reviewed on a regular basis to help with next-step decision making, and Blue Book’s A/R aging reports can be a valuable part of the equation. Comprised of aggregated A/R information shared by industry contributors, the reports reflect current risk, consolidated aging performance, and potential emerging trends. Maintaining a healthy A/R turnover helps protect your business, because cash is always king!
Images: A_KUDR, TeddyandMia, Icon Craft Studio, Anton V. Tokarev & 3RUS/Shutterstock.com
