Receivables are the lifeline of your business, so you want to be sure they are strong and healthy. If you are in the business of selling excess inventory you know how important it is to always have cash for buying closeouts and deals from companies who need to clear out their warehouse. Inventory buyers are known for coming in with cash offers and closeout buyers must be able to buy large surplus deals without asking for payment terms. There are things you can do to keep money coming in and eliminate old debt.
1. Send reminders often. If a payment is coming due and you haven’t heard from your customer, it is a good idea to send a reminder. Assuming your original invoice was sent almost 30 days ago, you may want to send another one 7-10 days before the due date just as a friendly reminder. You don’t want to send too many of these yet because the invoice is not yet past due. You can remind your customer you are in the closeout business and you specialize in selling excess inventory which you often pay in advance to get. You can explain how inventory buyers and closeout buyers get the best deals by offering the most and paying quickly; use this as a reason you need to be paid on time because it is the truth. Be sure to also remind the customer about payment methods you accept
2. Invoice quickly. Let’s say you have been buying closeouts from a company that wants to clear out their warehouse. Assuming this is a large inventory you may be shipping it out as fast as it comes in. Closeout buyers and inventory buyers need to ship fast because the cash flow is so important. But the real key is to be sure you are also invoicing quickly. Be sure to email invoices or get them in the mail as soon as you ship.
3. Simplify the process. If you are buying closeouts and you need to clear out a warehouse it is possible you are buying hundreds of different items at a time. This creates a huge number of discontinued products and closeouts that have to be entered into your system for invoicing. So when it comes time to bill your customers, you should try to make it as easy as possible for them to pay you. Create a detailed invoice that simplifies what you are shipping. Companies selling excess inventory often don’t understand how important it is to clearly identify all the skus with complete descriptions, item numbers, case packs and case counts. Make sure to list any taxes or additional fees so your customer doesn’t have to call you to ask about any of the closeouts they bought. Sometimes accounts don’t pay on time because the billing process is not clear.
4. Offer discounts. Companies often delay their accounts payable as a way to manage cash flow. This is a problem for those of us in the closeout business or operators of closeout websites. We need cash flow so we can go out and buy closeouts. Companies selling excess inventory want to be paid immediately for their closeouts and they don’t offer payment terms. But you can offer your customers discounts for early payment. For example, you can offer incentives for early payments by giving your customer a 2% to 5% discount if they pay in 15 days.
5. Move fast on past dues. The older a receivable gets, the harder it is to collect. Make sure you identify any past due accounts as soon as they exceed 30 days. It is important for a key management person to contact the customer 1 day past the due date. Companies selling excess inventory often work on slim profit margins so once an invoice is late the profits diminish. Closeout buyers and surplus inventory buyers often purchase large volumes of inventory and work on small margins to move product quickly. Delinquent payments can quickly erode profit margins and make the sale less attractive.