Sales are a big priority — but so are collections | Neglecting your accounts receivable — the money owed to your: business by customers who bought on credit — can be the most expensive management mistake you will ever make. . co If your credit terms are too liberal, your invoicing system too slow or your collec- tions ineffective you will find that your receivables grow. The money that is then tied up is no longer available to produce more goods or services: result — fewer sales! Replacing this money with borrowed working capital means increased operating by Phil Hartl Manager, Terrace Federal Business Development Bank costs in the form of higher interest: result — lower profits! But how can you tell when your receivables are too high? When has an account been on your books too long? There are two simple tests that will enable you to keep tabs on the credit side of your business: aging your receivables and calculating the average collec- tion period. Aging Accounts Recelvable “Accounts receivable aging’’ is simply classifying them according to the date of sale. At the end of each month list all accounts in- ’ dividually. You probably won't need more than four categories — Current, 30 Day, 60 Day, and over 90 Day, If you are aging as at June 30, any accounts opened during June will be current, any opened in May are 30’s, in April are 60’s, and in March or beyond — are your 90’s. If your credit policy requires payment in full within 30 days it is easy to recognize your problem accounts. It is a proven fact that when an account falls 90 or more days in arrears less than half are ever collected. Another side to written-off accounts — if your business generates a 10 percent net profit it takes . [ an increase in sales of $10,000 to replace a bad debt of $1,000. | Avold A Bulldup Monitoring your receivables has another benefit. By reviewing several periods you can determine if the level of outstanding ac-. J counts is increasing. If a buildup is apparent it might be time for a change in your credit terms or collection practices. . When your credit and collection system is under control the level should vary directly with your monthly or weekly sales volume. This leads us to the second test of your receivables: calculating the average collection period or the average number of days your customers are taking to pay their bills. . Calculating the Collection Period To do this, you need to know your accounts receivable total (in dollars) and the average daily amount of sales made on credit. The “collection period”’ is simply the Total Dollars divided by the Daily Average Credit Sales, For example, let’s assume you are carrying - ff accounts receivable of $16,500 and you make average daily credit sales of $300 ($16,500 divided by $300 = 55 days). This tells you your customers pay, on average, in 55-days. If you havea 30 day collection policy, you must take steps to encourage more prompt payment. Handle Arrears Carefully If you feel collection action is required on an account, review the file carefully before you proceed. First you must decide whether the account is a “‘can’t pay’? — willing but unable — or a “‘won’t pay” — able but unwilling. The first may be in some trouble now but may return to be a valuable customer in the future. The latter is far better off your books as soon as possible and preferably on your competition’s. How you choose to deal with these two situations will of course be quite different — patient, firm but fair with the first; an ‘‘or else’’ attitude with the second. Always remember you are nota § money lender. You provide a product or service for which you ex- pect prompt payment. You cannot afford to be a substitute banker ] for your customers. ‘Having a sound collection policy can be the key to your bottom- line success. Not only can paid-up customers buy more, but the prompt receipt of your accounts receivable reduces the costs associated with slow payments. RIAA KA AAA RIKI IAA AAA A AKANE KICK Award established “Active start for Legion by Roy Greening It looks like 1988 has started off to be a very active year for Branch 13, The New Year’s din- - ner and dance proved to be very successful, with almost all the tickets sold. Those who attended really enjoyed themselves untii the wee hours of the morning. The midnight snack was just great for ’88! Right on the heels of that event, as reported in the Terrace Review this week, the installa- tion of the 1988 executive took place. - On Jan. 29 and Jan. 31 the Legion curling bonspiel will take place. This has proven to be a very popular event in the past, and present indications show that it is still met with en- thusiasm. Other centers will be taking part, too. There will be a zone darts tournament on Feb. 20. There will be more informa- tion about that later on in this column, but everyone should be ek practising. Have you read about the adventures of Bill and Sid at Branch 13? Pick up your copy at the Legion. Perhaps you can recall some of your own tales by reading about these two charac- ters, or even put yourself in their. place. _ The bi-monthly newsletter will be coming out soon. If you have an event that you want put in this publication, get it to me as soon as possible. On Friday and Saturday nights, Jan. 22 and 23, dance to the music of Borderline and take away those mid-January blues. - The Legion zone curling - playoffs will be held on Jan, 23 and 24 at Hazelton. An Appeal to the Public The Legion is attempting to put together the pictures of all the Branch 13 past presidents, but some help trom the public is needed. If you know the whereabouts of the following men or know where there is a picture of them please let Hank Barg know by phoning him at 635-3463. His address is 44-4625 Graham Ave., Terrace, V8G 1A7. . W. Brewer (1921); W. Eg- gleshaw (1924/25); J. Harrison (1926); E.M. Lawrence (1927); J. Nelson (1928); Rolly Beecher (1932/33); J. Glenn (1953); T. Fletcher (1961); Lori Haynes (1969). ther Info. The Terrace Friends and Families of Schizophrenics Is a support group that mests once per month. Meetings are the 3rd Tuesday of the’ month at 7:30 p.m. at the Psych. Gonferance Room at Mills Memorial Hospital. One alm of the group is to provide community education about this iliness. Anyone wising to learn more or bacome part of this group is welcome to attend the meetings. Please call 638-3325 for fur- < ane ‘YOUR DAY <& : » have your newspaper i delivered every week. For just $24 you don’t have to miss a single issue! Subscribe A full year: $24.00 Two years: $45.00 now! Come Into our office, or send a cheque or money order, to: Terrace Review 4535 Gralg Ave., Terrace, B.C. _ V8G 1M7 Z Phone: __ Subscription Order Form: The City of Terrace will be sponsoring an annual ‘Order of Terrace’? awards program to of- ficially recognize any residents who have made an outstanding contribution to the community. In endorsing the concept originally proposed by Alder- man Doug Smith, Council adopted the recommendation of the Community and Recreation Services Committee at its last meeting and will be offering about 10 Order of Terrace awards each year. Council. agreed to include $500 in its 1988 budget to purchase 50 medals, about a five-year supply. In addition to the medals, the names of the recipients will be engraved on a plaque which will be kept at city hall. Council will be setting up a committee in the near future to determine the terms of reference, method of implemen- ting the Order of Terrace, and select the 1988 winners. C) 1 year - $24 eee (1 Cheque 01 Money Order on C] 2 years - $45 [] Charge Card: MasterCard (1 Visa 0 | fom : Cad # Expiry Date Please send a subscription to: a Mail or bring this form to: Name ; Address Terrace Review oe 46535 Grelg Ave., ae | Terrace, B.C. | Phone ~ Postal Code V8G 1M7