Too often, small businesses end up in a cash flow crunch because in management’s haste to grow revenues, they often forget to screen out potentially bad customers. Michelle Dunn, founder and president of Never Dunn Publishing, LLC, has over 20 years experience in credit and debt collection. In her new book, “The Guide to Getting Paid: Weed-out Bad Paying Customers, Collect on Past Due Balances, and Avoid Bad Debt,†she details some of the most common financial mistakes (and their solutions) entrepreneurs make.
“I tell every business owner, once a year you need to go through your accounts receivable and fire three to five of your customers–the people you’re spending a lot of time on the phone with listening to them explain to you why they have to pay late or why you should still ship their order even though they can’t send you any money,†she says. BE spoke with Dunn to learn more of those mistakes and how entrepreneurs can avoid them.
Mistake #1: Getting incomplete credit information at the time of the sale. “Some people will have someone fill out a credit application and the person might just put their name, address, and then just sign the bottom and they don’t fill in the reference portion they don’t put in their work information,†says Dunn. The danger there is that if their account becomes delinquent and the client has moved, the small business has no way of contacting that customer.