Working Memo

How to More Effectively Convert Your Accounts Receivable Into Cash

Thursday, March 11th, 2010

Converting accounts receivable into cash is a critical process in the development of a healthy cash flow. While booking a receivable is accomplished by a simple accounting transaction, the process of maintaining and collecting payments from your customers requires a steadfast commitment to a systematic process of Accounts Receivable Management. To more effectively convert accounts receivable into cash it’s essential that the credit and collection process be highly efficient in order for you to shorten the accounts receivable cycle time.

The accounts receivable cycle starts with a sale (credit sales) which in turn creates a receivable (monies due your company), and then, ultimately converts into cash. The length of time that it takes your company to complete this cycle, from sale to accounts receivable to cash, is the collection period. The shorter the collection period, the less time cash (capital) is tied up in the business process, and thus the better for your company’s cash flow.

Try to limit outstanding accounts receivable to no more than 10 to 15 days beyond your credit terms. If your credit terms are net 30 days, then the collection period should not extend beyond 45 days. Keep in mind that average collection periods do vary because of industry standards, company policies, or financial conditions of the customer. Comparing your company’s actual days of collection to the average days of collection within your industry is a wise business practice. Benchmarking your actual days of collection to that of your target days of collection (no more than 10-15 days over credit terms) is also advisable.

Your company’s average collection period is calculated by using an Average Collection Period Ratio. The ratio is referred to as an Activity Ratio; it measures how quickly your company converts non-cash assets to cash assets.

Average Collection Period (ACP): ACP = Accounts Receivable / (Credit Sales/365))

A high Average Collection Period implies that your company may be too liberal in extending credit to your customers and too lax in the collection process. A low number of days in your collection period could imply that your credit and collection policies are too restrictive. This restrictive position may be repressing your sales.

Accounts Receivable Turnover Ratio (ART) is an accounting measure used to quantify your company’s effectiveness in extending credit, as well as, collecting its debts. This ART Ratio is considered a Liquidity Ratio; it measures the availability of cash to pay debt.

Accounts Receivable Turnover (ART): ART = Net Credit Sales / Average Accounts Receivable

A high Accounts Receivable Turnover Ratio implies that, either your company operates on a cash basis, or that its extension of credit and collection of accounts receivable is efficient. A low ART Ratio implies that your company should re-assess its credit policies in order to ensure the timely collection of monies due from the accounts receivable ledger.

A key requirement for effective Sales and Accounts Receivables management is the ability to intelligently and efficiently manage your entire credit and collection process. Greater insight into a customer’s financial strength, credit history, and trends in payment patterns is paramount in reducing your exposure to bad debt. While a comprehensive collection process greatly improves your cash flow, your ability to penetrate new markets and to develop a broader customer base hinges on the ability to quickly and easily make well informed credit decisions and, to set appropriate lines of credit. Your ability to quickly convert your accounts receivable into cash is possible if you execute well- defined collection strategies.

Credit Process:

The initial requirement of an effective credit management process is to have each company that you plan to do business with, complete and sign an Application for Credit form. Your Application for Credit form should include, the “terms and conditions of sale,” space for the prospective customer to provide information on company background, a list of principal owners with their percent of ownership, three to five trade credit references, and the name of their bank(s).

It is important to personally review with the prospective customer their projected product purchases – in both dollars and in units. This review helps to initially assess the amount of credit necessary to purchase the projected products. This review also helps to determine inventory requirements based on a projected sales forecast

Collection Process:

An efficient and effective collection management process includes well defined policies and procedures that facilitate a more expedient, sale–to-cash cycle. The collection procedures require “attention to detail” and should include:

• Billing: Preparation, recording, and delivery of invoices as soon as the product/service is delivered or installed.

• Statements: Preparation, recording, and delivery of follow-up statements that indicate aging of outstanding balances.

• Accounts Receivable Aging Schedule: Preparation and distribution of an Aging Schedule that lists all of the customer accounts that have outstanding balances. These outstanding balances are then categorized into 4 categories of time: 1 to 30 days, 30 to 60 days, 60 to 90 days, and over 90 days.

• Telephone Calls: Placement of courteous and professional telephone follow-up calls to customers with past due, outstanding balances for the purpose of establishing a date of payment.

• Collection Letters: Preparation, recording, and delivery of collection letters with an urgent message that demands payment and provides details of the action that will be taken if payment is not received by a certain date.

• Recording Payments: Posting of the amount of payment to the appropriate customer account. If possible, it is advisable that the person performing the collection duties not be involved with the posting of payments.

• Deposits of Collected Funds: Preparation of the deposit ticket, along with accompanying funds, should be deposited in the bank on a timely basis.

Factoring as an Option

Very simply, factoring is short-term financing that is obtained by selling or transferring your Accounts Receivable to a third party – at a discount – in exchange for immediate cash. In most cases, the third party, a factoring company, audits your accounts receivable to determine their collect-ability. If the factoring company feels that your receivables are bona fide then, they will offer to purchase the current ones at a discount. A factoring company may also, under the right circumstances, purchase your future receivables at discount off the face value of the receivables. The percentage discount depends upon the age of the receivables, how complex the collection process will be, and how collectible they are.

Once the factoring company collects a particular receivable, they will pay you the remaining balance of that receivable’s face value, less their fee. Fees vary widely from one factoring company to another. So, it is recommended that you do your due diligence before engaging the services of any particular company. Factoring fees are not insignificant when compared to the amount of interest you might pay to a commercial lender. For this reason alone, you should view factoring only as a short-term solution rather than a regular outlet for collecting your receivables.

Many businesses, that need an immediate infusion of cash in order to survive and/or to bridge their cash flow gap, could benefit from the process of factoring accounts receivable. Since failing businesses regularly turn to factoring as a last resort, factoring may be viewed by many people as a negative. Although factoring may be a great way to generate cash quickly, you should consider the perception that factoring may convey to your customers and to others in your industry. Your good judgment here should dictate if your company could benefit from the quick cash flow that factoring provides, or whether or not it would be just adding to your company’s financial burdens.

Shortening the accounts receivable cycle time generates the healthy cash flow that is required to sustain your company’s growth and prosperity.

Copyright 2008 Terry H. Hill:

Terry H. Hill is the founder and managing partner of Legacy Associates, Inc, a business consulting and advisory services firm. A veteran chief executive, Terry works directly with business owners of privately held companies on the issues and challenges that they face in each stage of their business life cycle. To find out how he can help you take your business to the next level, visit his site at http://www.legacyai.com

To download a copy of this article, click on this link:. http://www.legacyai.com/Article_Convert_A_R.html

Tags: Accounts, Accounts Receivable Management, Business Practice, Business Process, Cash, Cash Assets, Cash Flow, Collection Period, Collection Periods, Company Flow, Company Policies, Convert, Cycle Time, Effectively, Into, Length Of Time, Monies, More, Practice Benchmarking, Process Management, Receivable, Simple Accounting, Steadfast Commitment, Target, Time Cash
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Make Cash Online – Each Affiliate Must Approve You Individually(Part 2)

Monday, March 8th, 2010

As I wrote in an earlier article (Make Cash Online – Affiliate Marketing With Commission Junction – Part 1), one of the easiest ways to make cash online is through affiliate marketing. Affiliate marketing is getting your traffic to buy a company\’s product. You get paid when someone from your website, blog, or email list buys someone else\’s product. In the first article I gave you a first-hand review of the advantages of one of the largest affiliate marketing companies today – Commission Junction. In this article, I will explain some of the disadvantages of Commission Junction.

Each Affiliate Must Approve You Individually

While you can find hundreds of affiliate programs through Commission Junction, each affiliate that you apply to must approve you individually. This can be time-consuming if you are applying to several different affiliates. For more details www.myspace-marketing-secret.com While many affiliates will respond to your application within a couple of days, there are others that take a week or more. Now, to be fair, I am not sure there is much Commission Junction can do about slow responses, but it is something that you need to be aware of.

Commission Pay Is Confusing and Slow

Commission Junction\’s method of tracking commissions can be confusing. They have different levels of pending commissions (commissions that are not payable yet). The levels of pending commissions are new, extended, and locked. After the commissions get though the locked status, then they are moved to your current balance. Now, my experience has been that from the day I earn commissions from my website, it may take anywhere from 1 – 3 months for me to pocket that money. The length of time can vary in many ways, but much depends on when during the monthly cycle of commissions the commissions were earned. So you have to be a little patient in getting the money from Commission Junction into your bank account.

Customer Service Is Weak

Commission Junction has done a lot of work to improve their customer service lately. But their customer service is still not as good as other affiliate marketing programs. For more details www.greatpromotionsite.com The primary source of contact is email, so it may take a couple of days to get an answer to your question. Also, their FAQ is really too large. There is so much information in there that you sometimes can\’t find what you need.

As a final review, while there are disadvantages to Commission Junction, they are still one of the top affiliate marketing programs and I would recommend using them if you are interested in affiliate marketing.

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Maverick Money Makers Club – Does it Really Earn You Money?

Friday, January 22nd, 2010

Maverick Money Makers Club alone will not earn you money obviously, it is what you do with the information, tools and guidelines that you are provided that matters. I have had many people ask me if I am really making the $300 plus per day from using the Maverick Money Makers method. The answer I give to them is this “$300 per day is not my target”. This might sound like a crazy answer to you but hold on a minute and hear me out; do you know that 300 per day is just $9000 per month? Oh yes it is and I can tell you that I average $11,000 per month after deducting outsourcing fees and other expenses.

 

The Maverick Money Makers Club is a closed group of marketers who keep certain market information close to their chests to avoid saturation. If you have been in the online business for a length of time you will know that saturation is the biggest problem. As soon as too many people begin to use a certain system it sort of fizzles out. So the Maverick Money Makers know that paying a token to stay within this tight circle is very rewarding to those who take action.

 

I have seen people sign up for the Maverick Money Makers Club and cancel after a few days simply because they thought they where about to be show a place on the internet where they enter their  full name, home address with full post code and the checks will start coming. So if this is what you are looking for I will save you the time and say please don not signup for the Maverick Money Makers Club. But if you understand that there is a right and wrong way to go about everything in life, then join the Maverick Money Makers Club and be shown how you can indeed generate a three figures sum from home.

 

But remember like the answer I give, do not cap your earnings because the more you put in the more you get out of it. Another thing I must point out is that to get to the heavier earnings faster learn how to put back some of your earnings into your business by hiring people from sites like GAF to do some of the more time consuming jobs (this is the method I use to ramp up my earnings).

 

I wish you the best in your endeavours.

Tags: Cancel, Checks, Chests, Club, Earn, Earn Money, Earnings, Few Days, Home Address, Information Tools, Length Of Time, Makers, Market Information, Marketers, Maverick, Money, Money Makers, Really, Right And Wrong Way, Saturation, Tight Circle, Token
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Ambush Google and Create Wealth

Saturday, November 14th, 2009

It’s not enough to use Google anymore. You have to control it, make the Google guys do your bidding.

That means you have to know how to get your PPC ads in the right spots, grab the high-converting clicks and invade markets like a juggernaut. Can you?

I don’t know if you can on your own, but with Google Ambush you most certainly can be the 800 pound gorilla in days, maybe a few weeks at the outside.

The whole story’s right here, including the incredible saga of how Andrew and Steven came up with Ambush in the first place:

I’ve told you about Google Ambush before, but it’s busting ClickBank wide open now. The hordes are pouring in, and the price will be going up soon, as promised. It’s now or never.

So I want you get one number in your head. No, it’s not some income figure, although the results they show on that page are insane. Instead, it’s a work figure…

400 HOURS

That’s a long time. It’s also the typical length of time it takes people to create Pay Per Click campaigns as complete, as optimized and as profitable as what Andrew and Steven’s software can pump out in literally minutes.

Imagine slaving away for 10 full-time weeks to get the job done.

Most people never do that. They dive in with enthusiasm, but after a couple weeks they take one of two paths.

Some just drop it. It’s a TON of work, and it’s easy to get frustrated and bag the whole thing.

Most people, though, fire up the campaign while it’s still held together with loose screws and duct tape. Then they hope for the best.

The result? Almost always extreme disappointment, high cost and broken dreams. Then they quit in frustration just like the early quitters, but these folks are a lot poorer.

It’s a shame, really, because lots of these people quit right before they start seeing some decent results.

That’s why Google Ambush is quite possibly the “killer app” for PPC. It takes all of the frustration away, and cuts the time required to the bone.

First, the software digs into the hottest niches on the planet by looking at what’s actually selling like crazy. That research along could take you weeks.

Then the software spies on the competition in that niche and (I swear this is perfectly legit) figures out which keywords you can hit like a ton of bricks and beat all comers. Seems like cheating, but it’s really just being smart. And the software does it automatically.

Then this almost magic tool virtually locks in your profits by finding the ads in your niche that are ALREADY profitable so you can copy them.

That’s the key…finding what’s already making money and doing the same thing. Why waste time figuring out what works when your competition will tell you without even knowing they’re doing it?

And finally, Google Ambush will translate all of that work into a separate, beautiful, high converting landing page for each keyword. Have 250 of them? No sweat. You’ll get 250 pages at the press of a button. Have 5,000? Just as easy.

Imagine spending a few minutes with Google Ambush and raking in over $20,000 in 24 hours. There’s no guarantee you’ll do that every time, but since it takes nearly no time at all to get up and running in a niche, you can try a few before you strike gold. It’s painless!

Can you see the possibilities? I know you can, and it’s why people were chomping at the bit to get their hands on this.

Don’t wait, though. The introductory price IS going up soon, if they even keep the doors open at all.

Why keep sweating for your profits when they can be as close to push-button easy as you’ll ever get?

==>> Google Ambush

Here’s to Ambushing Google,

Google Ambush

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How to Get Quality Back Links

Thursday, October 8th, 2009

If you have been around the website and blog world for any length of time you are probably starting to realize how important quality back links are to your website, blog, ebusiness or ecommerce site. Back links are links that point back to your website or blog and will generally be the determining factor deciding if your site gets a little bit of traffic or a ton of it. We all know that without visitors a website or blog is nothing more than some pretty pictures sitting in the middle of what I like to call the Internet Graveyard!

First, you should know there are many ways to going about getting them but at this time we will discuss the most efficient ways. Begin by signing your blog or website up to social marketing websites such as Digg, Facebook, Twitter, Stumble Upon, etc. Each of those companies rank high with Google and Alexa’s search engines. This is the easy part. Next the grunt work begins. You’ll need to begin making comments on blogs and Interent forums that are related to your sites content. Use a tool such as Comment Kahuna to determine the page rank of the blogs and whether or not they carry a nofollow policy or not. Otherwise your efforts will result in little progress. Make sure your comments are helpful to the website you are commenting on for two reasons. One is because if you just write something stupid and meaningless the administrator will disapprove the comment and second because people read comments. If you have wrote something intelligent they will click on your name and visit your website. Always make sure you enter your blog or website address when entering your comments otherwise the back link will not exist. The final thing you can do is begin writing quality articles to article directories such as this one. Each article you write will leave a back link to your website. You could also write articles and ask permission of other owners or bloggers to post them to their high ranking sites. People are always looking for good content especially when it comes to Internet Marketing.

If you really want tons of traffic it’s probably a good idea to get somewhere between 4,000 to 10,000 of them. Some people will tell you that quality is better than quantity and to a certain degree I agree, however, If you have thousands of quality back links you can’t help but having thousands of visitors stumbling over each other to get to your site. Just use a link checker to check the amount of back links your competition has. You will see some as high as 150,000 or so. If you could add 5 to 10 a day you should have a booming and very profitable website in about 7 months to a year.

If you don’t have 7 months to a year to build all these back links for yourself and you need a real alternative to generate large amounts of traffic fast then visit my website here.

Tags: Alexa, Back, Bloggers, Blogs, Directories, Facebook, Google, Grunt Work, Interent, Internet Graveyard, Kahuna, Length Of Time, Links, Little Bit, Marketing Websites, Page Rank, Pretty Pictures, Quality, Quality Articles, Search Engines, Social Marketing, Traffic, Website Marketing
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Pay-per-click – Formula for Success

Saturday, October 3rd, 2009

Is There Really A Pay-Per-Click Formula For Success?

Affiliate marketers are keen at finding ways to get merchants in front of potential customers. There’s article marketing, building niche websites, forum marketing, social network marketing, and pay-per-click, to name a few.

Which Formula Is Right For You?

Each of these marketing strategies varies widely in the amount of time and money invested to capture targeted traffic to merchant goods and services. For instance, forum marketing and social network marketing require very little time or money. Article marketing requires no investment of capital, but can take a great deal of time depending on how efficient you are as a writer. Building niche websites is even more time-consuming, plus you have to shell out funds to purchase a domain name and cover hosting fees. All of these methods are great ways to earn income by driving targeted traffic to merchants who pay a commission on each sale you generate for them.

But there is another highly lucrative business model that you might want to consider. Now be warned, perfecting this method is not easy. Simple mistakes in your execution could cost you hundreds of dollars. But if you can decipher the formula, pay-per-click advertising, or can pay off handsomely.

More specifically, we’re talking about the pay-per-click to cost-per-acquisition business model, also known as PPC to CPA or traffic brokering. If you have been in the internet marketing arena for any length of time, you have at least a general idea about the marketing methods discussed above, but very little is talked about or even known about using PPC to drive laser-targeted traffic to lead offers. Now generally, CPA offers pay less than a few dollars for each lead generated, but if you know the formula for capturing pay-per-click traffic that converts, there is the potential to make hundreds and even thousands of dollars a day.

The method behind using PPC to drive traffic to high-converting CPA offers is to get your pay-per-click ad in front of as many qualified visitors as possible. There are many different underground techniques to do this (they are “underground” because a very large majority of PPC marketers do not use or even know about these strategies). Now, you shouldn’t be buying ads targeting general keywords and phrases, that would be silly. Not only will you get tons of untargeted traffic, your ad costs would be astronomical. What you want to do is target some of the lesser-known search terms – terms that even the most savvy PPC marketer wouldn’t think of bidding on. You essentially want to cast a wide net which targets as much traffic as possible, while keeping your costs as low as possible. This is the key to creating the perfect pay-per-click formula.

Why Is Pay-Per-Click to CPA Info Hard-To-Find?

There is very little information on the Internet about PPC to CPA marketing. Maybe it’s because this method is so new and smart PPC marketers are still trying to figure out what works and what doesn’t. Or maybe it’s so obtuse that there is no one right way to do it. The most likely reason is this – the guys making the big bucks have secretly discovered the ideal pay-per-click formula and are keeping it all to themselves.

Tags: Affiliate Marketers, Amount Of Time, Article Marketing, Business Model, Cpa, Formula, Formula For Success, General Idea, Length Of Time, Little Time, Lucrative Business, Marketing Methods, Marketing Strategies, More Time Consuming, Network Marketing, Niche Websites, Pay Per Click, Pay Per Click Advertising, Payperclick, Ppc, Success, Thousands Of Dollars, Time And Money
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