Do you have a Business Plan?
Whether you are a start up or have been in business for 25 years, every business should have a business plan.
One great thing about business planning is it really gets you thinking about the direction you want to take your business. As a business owner as well as a Part Time CFO, I can tell you that business owners need to spend more time really thinking about the direction they want their business to go. Preparing a business plan provides the impetus to get you thinking about that direction.
Changes to the plan are encouraged as a business plan is not one of those things you write up once and stick in a drawer never to be seen again. A business plan is a working document that is subject to perpetual changes. It is the working document aspect of a business plan that makes the business plan effective.
Business plan preparation should be a part of every CFO’s arsenal of CFO Services.
Establishing a system of collecting accounts receivable so that your receivable strategy is consistent and timely is critical to successful collections. It is incumbent upon the CFO to provide the direction to implement the Accounts Receivable Collection strategy. Here is an example of a strategy that if applied consistently and timely will lead to successful Accounts Receivable Collections:
Assume an invoice with terms of net 30 days
Between the 35th and 40th day contact the customer. If the customer is a customer you know pays within 30 to 40 days based on a history that you have with that customer then do not contact until the 40th to 50th day.
If customer does not return your call or you were not satisfied with the customer’s answer then send a 10 day Demand Letter, requiring payment within 10 days or account will be put in collection.
If not paid by the 11th to 15th day then put the account in collection.
I always use a collection agency that has a legal staff so that if the account is not collected using traditional collection methods legal action can be taken right away. Once again the key to the process is consistency and timeliness.
Accounts Receivable collection strategy is one of many important CFO Services.