Debt collection during harsh economic times

By Juliet Neguwon

Mrs. Ocheng runs her own business that sells a wide range of hardware and construction materials in Namasuba. Most of her customers are those who have been purchasing from her overtime and also those often referred by friends hence her business sales revolve around referrals and repeat clients.

In a bid to maintain her business as well as clients, she offers credit to old clients who consent in writing to pay their debts after an agreed period.

This arrangement varies from client to client who are mostly individuals and organizations including other high profile class people like the MPs, Wealthy Class etc.

However, Mrs. Ocheng’s business is currently faced with a major challenge of cash flow to pay her rent including re-stocking as most of her debtors have failed to honor their obligations.

Most of them prefer to pay smaller amounts leaving huge balances unpaid, meanwhile some take long to pay and others do not pay at all! On the other hand, all her other business transactions with her suppliers is done on a cash basis including paying rent in advance and staff salaries.

She therefore expects to get paid by her debtors promptly and in full to enable her meet her pressing financial obligations.

Surprisingly and to her disappointment her debtors no longer pick her telephone calls and some continue telling her to wait with no signs of commitment to pay!

Mrs. Ocheng understood the principle that says “CASH IS KING and to make a profit you have to produce goods or deliver services to the customers before being paid as a crucial tool for attracting clients!”. She forgot to manage the most fundamental and important process of the deal that says “a sale is not a sale until fully paid for!

During difficult financial times and with the current economic recession, businesses are faced with customers who either unwilling to pay or prefer paying by installments leaving huge balances unpaid. Making sure customers pay their invoices on time and in full is in today’s business environment is extremely hard and more challenging than ever!

Cash flow issues are often a fact of life for small businesses and evensuccessful, growing companies are vulnerable to cash flow problems; especially in today's economic downturn.

Because having cash at the right time is so important, businesses must pay close attention to debt collections and credit
management so as to avoid bad debts.

Knowing how it is possible to collect accounts receivable faster can be critical to your business during times of stress hence the quicker you can collect your debts the better!

There are many organizations faced with similar challenges like that of Mrs. Ocheng which require tactful sales with an ultimate goal of collecting the monies owed.

Making a sale is important but getting paid is even more important and right now, with cash tight and business slowing down, organizations need to go after their accruals as a way to raise needed cash.

Never forget that the survival and success of your business depends on how soon you are able to collect due accounts especially in an industry where you are in daily competition with other people over limited cash in order to get paid.

The effect of cash is real, immediate and if ignored can be disastrous!