It's Payback Time

Planning Makes Perfect

Take steps to improve your bottom line by casting a gimlet eye toward your overdue accounts and by creating an efficient and comprehensive collection plan, just as Parker did.

"We instituted a flow-chart process indicating what steps each employee should take for every day the account was overdue 30 days," says Parker. The steps Parker LePla has used range from simple e-mails from the account executive who handled the client to, in extreme cases, turning the matter over to an attorney. The plan was an overwhelming success: Accounts over 90 days old shrank from $450,000 to $45,000 in just six months.

of fast-growth CEOs said lack of capital could impede their growth over the next year.
SOURCE: PricewaterhouseCoopers

An effective collection plan should also involve a thorough review of your accounting system's "front end," such as checking credit references more carefully and obtaining comprehensive information about a customer's payment history. "Look for the red flags at the beginning of the process," cautions Baumann. "Due diligence gives you more leverage if the customer can't or refuses to pay." Baumann advises his clients to beef up their credit applications and to require a guarantee of the principals' assets if there is any question about creditworthiness. A personal guarantee, says Baumann, "ensures a debtor will take an overdue account seriously."

Like this article? Get this issue right now on iPad, Nook or Kindle Fire.

This article was originally published in the April 2002 print edition of Entrepreneur with the headline: It's Payback Time.

Loading the player ...

Shark Tank's Daymond John on Lessons From His Worst Mistakes

Ads by Google

Share Your Thoughts

Connect with Entrepreneur

Most Shared Stories