Why are you not managing your Accounts Receivable today?
For a lot of business owners, managing AR is not a big deal. Since the Great Recession, except for the Covid-19 recession, business has been strong and growing. During those times, our customers are doing well, and they pay their invoices. Several industries were severely hurt by Covid, but a lot of industries made it through Covid fine or at least ok. Therefore, there are a lot of business owners that haven’t worried about collecting for over ten years.
Right now, there are signs that things may change. With interest rates rising real estate professionals are talking about some real estate segments slowing down. If there is a slowdown in real estate, the job market will show signs of weakness. This is a complicated way of saying, that some construction workers will lose their jobs. When that happens, for some of your customers that might mean that paying invoices will slow down to invoices not being paid at all.
Do not get caught by this by surprise. Get your aged receivable report for today. Then get the aged receivable report for the same day from last year – or have them printed side by side on the same page. If things are similar, good for you. Here is your homework, do this every week or month depending on which industry you are in.
If things show signs of a slowdown in your collections, start focusing on collecting now. Please realize, that large credit card companies use AI to look for signs of a slowdown. They look for those signs every day and every hour. That is their business. Use this approach in a way that works for your business. At least once a month – compare your receivables now to last year. Getting a new project is great. Getting paid all your money can be just as important. And when things slow down a lot – it might even be more important.