The truth is that most customers with past-due accounts welcome an opportunity to keep their good credit rating. – JP Stonestreet, CEOAs we close in on a wonderful summer season here on Maui, many of our businesses have flourished, some broke even, while others worked hard to make ends meet. For all of us, collecting owed money is a vital function.
Many companies have developed smooth, streamlined processes to go after and collect debt. Other companies find themselves negotiating for their due money. There are two common themes here. Both types of companies are owed money and both are owed money that is past due.
In a seasonal, slower, downtime, it is crucial and optimal to stay focused on a positive sustained cash flow. Schedule an appointment with your partner, bookkeeper, accountant, CPA, or in some situations, your lawyer.
Obviously on Maui, tourism strongly correlates with the current financial state of most of our businesses, directly or indirectly. That being said, just as in any type of industry, we must be aware of the pros and cons of debt collection and how to best deal with it in a professional manor.
Since keeping positive cash flow is important in tight times, we should explore the need for monetary collection that is rightfully yours. Bills are generated to reflect money due for a service or product rendered. As the owner or manager of a company, it should be very high on your priority list to collect bills in a timely, proper fashion. Consider the following to help inject cash back into your company:
- Stay level-headed, enforce credit policies, but do not provoke confrontation.
- Treat new client pay arrangements with extreme caution, especially in the beginning.
- Set up programs to prevent late payments; consider surcharges when appropriate.
- Draft clear, concise contracts that are enforceable.
- Be prepared to give sensible and valid reasons why you need on-time payments.
- Be flexible, but firm and use situational intuitiveness on a case-by-case basis.
- Contract with a credit agency that can manage the process for you, but be prepared to pay handsome fees on monies collected.
- Consider arbitration, mediation or the court system as a last resort.
- Don’t make the same mistake twice. You don’t have to do it alone. There are some experts that can help you such as SCORE, SBDC, Maui Resource Center and others.
This is wise business. As always, it is my sincere pleasure to give back to Maui through business education.
Chevy Tharp is regional vice president, Hawaiian Islands and Western U.S., for Meridian Business Brokers & Meridian Group Hawai‘i. Tharp is an international business consultant and business broker who specializes in helping people buy, sell and improve businesses. He welcomes you to contact him at chevy@mghawaii.com or (808) 268-6131.