Accounting for the Numberphobic by Dawn Fotopulos

Author:Dawn Fotopulos
Language: eng
Format: epub
ISBN: 9780814434338
Publisher: AMACOM

In short, the accounts payable clerk was wonderful. I’ve forgotten her name, but not her kindness. I got paid within five business days.

In addition to building rapport with Susie, small business managers will do themselves a huge favor by understanding the world from her viewpoint.

Tailor Your Invoices to Susie’s Sign-Off Privileges

Ask Susie about the limits of her sign-off privileges and keep your invoices within those limits. Commonly, Susie will have sign-off privileges for smaller invoices, typically under $5,000. If an invoice arrives that is larger than her sign-off privileges, she needs her boss or her boss’s boss to give approval to cut the check. Why? It’s good risk management at the client to make sure there’s no fraud and their cash flow is protected. The problem for you is that when your large invoice has to be sent up the management chain to get the required sign-offs, the wheels slow way down. The larger the invoice, the more sign-offs are required to release the cash to pay it, and the greater will be the delay in receiving payment.

You should expect payment policies and cutoffs to become more restrictive when a business is operating in an economy that is not growing, because your clients are trying to manage their risk like everyone else is. If Susie had $5,000 sign-off privileges when the economy was booming, her sign-off privileges might fall to half of that when sales revenue drops and cash is tighter. This is perfectly normal—you just need to know how to anticipate and manage it. If you sent out $5,000 invoices before, you should start sending out $2,500 invoices, with greater frequency, if the total outstanding invoice is large. If the customer writes a big order, stagger-ship the order so you can stagger-invoice the client. Then, if the client has problems paying, you won’t be out the entire value of the order. (I would have made a lot more money if I had followed this advice 15 years ago.)

Tailor Your Billing Cycle to Susie’s Payment Cycle

Ask Susie what the payment cycle is at the client, and send invoices to coincide with it. Most companies pay bills every two weeks or every month on a certain date. Put those dates in your calendar or make your bookkeeper or accountant aware of them so you can send invoices in advance of each check-cutting date. Verify once a quarter that the process is still the same. If you send an invoice right after those cutoffs, you’ll have to wait until the next check-cutting cycle to get paid. Waiting to get paid always costs money and squeezes cash flow.

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