Most businesses do excellently in producing and delivering products and services to customers. However, most of the time, there is difficulty in collecting payments. If the problem is unresolved, it may accrue to cause a cash flow crunch. You should determine credit worthiness of each customer before agreeing to take payment as receivables.
As a business owner, yours is the prerogative to set and implement reasonable and logical credit policies. Here are five of the best proven techniques that you can use to optimize your cash flow and at the same time enforce your own terms in a more diplomatic yet firm manner.
1. Require deposits if possible.
It is advisable if you would require about 10% to 50% deposit of customers’ final purchase price during order time. This practice is most recommended for large sales orders, custom orders, and produce-to-order manufacturing. This trick can truly be helpful in preventing possible cash flow shortage in the future. At the same time, it can be a good strategy to ensure the commitment of customers to their significant order. Take note that when implementing this strategy, your business should clearly explain to the customers that deposits are in no way refundable. Continue reading