To move at stronger levels of collection efforts on your accounts receivable here’s what you need to do.  Predict, don’t just act and track on your accounts receivable.

That will give you a great benchmark for managing your progress against the collection.  The first level would be just doing this on the overall basis, but you can do much better than that.

The second level would be to drill down by each collection.  So you predict how much you collect in the current period, how much in 0 to 60, how much in 30 to 60, how much in 60 to 90, how much in 90 to 120 and how much over 120.  You use this history as a basis to develop a predictive model.  You keep continuing this and probably after about 10 weeks of time, you’ve got a nice model developed that goes across for a long enough period of time.

Even better could also be doing predictions by some finer segment in the business, either by product line, service line, geographic territory or other factors that may be important to you.

So to get really good at receivables predict, don’t just act.  Set targets for what your future receivables will be and then monitor your progress against those particular targets.  Give yourself a pat on the back if you’re doing much better.  And if you’re not quite better yet, you’re still going to be in a good position to get it better than most companies.

Jon Paul, MBA, CPA, CMC, CM&AA

President, Value Added Finance Resources
Bringing new insights on results and maximizing company value