In episode 2, we covered the ins and outs of collections in the context of running and growing a business. Jason went deep on how to get paid or more precisely, collections....
In this episode of Pain in the GAAP, we covered:
Working definition of collections. You bring in cash to fund operations, from operations. And the faster you collect money and more invoices that get paid, the more you fund operations with operations.
Influence of collections on a business. Cash flow depends on how fast you collect from customers, how slow you pay vendors, and how quickly you move inventory off of the shelf. The smaller the gap, the less external investment you need to fund operations. The wider the gap, the more investment you need.
Visibility into collections. It’s critical to have a schedule of invoices for all existing customers for next 12 months (something you can easily view via the Ordway billing and revenue automation platform), especially if you have quarterly, semi-annual, annual billed customers, what the terms for each of those customers (or at least the material ones), and an Aging report.
Aging report. An aging report helps you see, visually, how your unpaid invoices have “aged”.