How to Collect Debts Effectively

April 24, 2019 by Comerica Bank

Debt collection is a problem that most businesses have to contend with. Recovering money that customers owe your business is a challenge that requires a systematic approach and careful judgment.

Effective debtor management is the best way to keep debt problems to a minimum. But despite all your best efforts, there will always be customers who don’t pay on time.

Identify potential bad debtors and act quickly

Set up your accounting system to flag overdue accounts. The sooner you take action, the more likely you are to get paid.

Conversely, inaction or procrastination will diminish your chances of getting any money. As with all debt collection tactics, wise judgment is essential. You don’t want to annoy important customers, but you also don’t want other customers (and there will always be some) to take advantage by treating your business as an interest-free source of money.

Handling overdue payments

There are no hard-and-fast rules on how to handle late payers. Your approach will likely need to depend on your history with each customer and their reasons for being overdue.

Take the initiative and find out why payments are late

Don’t expect customers to always contact you first about their payment issues – take the initiative yourself. Start by resolving or eliminating any obvious causes, such as:

  • Your customer never received your bill, or the goods were sent to the wrong address. This may be an excuse or a genuine reason for non-payment. For bigger firms, the invoice may well have been sent to the wrong department where it was simply ignored. Make a point of sending a copy of your invoices within a day or two of a bill being overdue. You can also follow up with a call (if necessary) to ensure the right person received the bill.
  • Your invoice or statement didn’t comply with the customer’s requirements. This can be a problem for larger corporations, as it can send your bill to the bottom of the pile or lead to it being ignored completely. Check the customer’s original order and compare any requirements to your invoice records. Make sure you included all the required details, such as the customer’s order number or account number, along with the name of the person or department who made the order.
  • The invoice was unclear. Your bill may not have correctly detailed what goods or services were delivered. Also, make sure your payment details are clear and comply with the customer’s preferred payment method. For example, if your customer prefers online payment, be sure to include your account details.
  • Your customer has a problem with your invoice or with the quality of your goods and services. If so, resolve any issues as soon as possible to reach an acceptable solution. This eliminates any further excuses for not paying.
  • Your customer has a glitch with their accounting or payment systems. This can usually be resolved quickly − as long as it’s not an excuse for something more serious.
  • Your customer has a cash flow problem. If you can negotiate a solution, get the customer to sign an agreed repayment schedule and make it clear that any partial payments will not be considered settlement in full.

Make contact with your customer

Once you’ve resolved any barriers to payment, make direct contact with your customer. Start with a polite reminder or enquiry about the bill, as overdue payment may not be any fault of the customer, and then follow up as necessary.

Try one or more of the follow-up tactics below:

  • Personal visit – a face-to-face encounter can often solve the issue or ensure you get priority treatment. It’s also an opportunity to negotiate payment solutions. Perhaps the customer can pay by credit card instead of cash or through agreed installments, but make sure to obtain clear, written understanding that no partial payment will be regarded as a full or final settlement.
  • Call your customer – your voice doesn’t have the immediacy of a face-to-face visit, as a simple call can make it easier for your customer to be evasive or offer the classic ‘the check is in the mail’ excuse.
  • Email – this is the most distant tactic and is, therefore, the easiest for customers to ignore or evade.

Promptness and persistence are the two keys to getting paid. A single visit, call or email can be fruitless, but persistent follow-ups may very well do the trick - once the customer realizes you aren’t going to give up easily, they may prioritize your invoice.

Employ debt collectors or lawyers

If all else fails, consider debt collection agencies or a lawyer.

Try contacting your customer one last time to let them know you plan to pass the matter over to a lawyer or debt collector – you can always blame your ‘accountant’ for pressuring you.

Once you hand the debt over, there’s a strong possibility that the customer will realize you’re serious about chasing the debt. They’ll often pay up right away, either in full or in agreed installments. A letter from a lawyer or agency can go a long way.

Check the cost of various debt collectors

Ask your business contacts to recommend a few debt collectors or lawyers who specialize in debt collection, then compare their costs and services.

Costs are likely to include a flat fee or a percentage of the debt recovered – or a combination of both. Find out exactly what the fees cover and check if there are any additional charges.

Consider how much you’re owed

Is it worth chasing $500 when it’s going to cost more to collect the debt? Sometimes it’s better to write off small amounts to preserve an important business relationship.

Writing off late payment penalties could also be in your best interests if you’re chasing a large order from a customer.

This information is provided for general awareness purposes only and is not intended to be relied upon as legal or compliance advice for your business.

This article is provided for informational purposes only. While the information contained within has been compiled from source[s] which are believed to be reliable and accurate, Comerica Bank does not guarantee its accuracy. Consequently, it should not be considered a comprehensive statement on any matter nor be relied upon as such.

Read More

Creating a Cash Flow Budget

April 17, 2019 by Comerica Bank

While most companies are focused on generating revenue, and rightfully so, it's important to remember that money doesn't only flow into a business, but out. Profits are just one part of the equation, as businesses have monthly expenses and debt obligations they must meet. This means owners have to pay strict attention to their reserves to ensure they always have enough cash on hand. This is called cash flow budgeting, and it's an important process for any business.

How to create a cash flow budget

Cash flow budgeting is the practice of tracking all cash inflows and outflows. Inflows are your cash receipts: any accounts receivable expected within a certain time period, immediate payments made to a business or income from other services. Outflows refer to the fixed and variable costs that operations incur, including electricity and gas payments, insurance premiums, building rent, equipment fees and employee wages. Creating a cash flow budget is a matter of adding up your inflows and subtracting your outflows. What you're left with is the remaining cash balance you'll have on hand, or cash flow. If it's a positive number, great; if negative, there are issues.

Creating a cash flow budget for any given month is as easy as:

  • Using a basic spreadsheet application or software, like those available from Microsoft®️ or Google®️.

  • Tally up what you expect to receive from accounts payable, recurring revenue and carry-over surpluses.

  • Add together your expenses; estimate your variable expenses to the best you can, even overestimate slightly to leave wiggle room. 

What's left is your cash reserve, a sum from which you can draw for ad hoc costs, reinvestment in your business and other reasons. A cash flow statement is the document itself depicting your inflows and outflows. It's required for publicly traded companies to file such statements with regulatory authorities. While small businesses may not be required to provide statements, there are benefits to keeping records. For one, visualizing cash flow can help you to better manage it; also, potential investors will usually demand that level of insight into operations before extending financing.

Cash flow forecasting

The reason a cash flow budget is so critical is that profitability on paper doesn't always translate to cash on hand. For instance, if your clients typically pay a month or two after services were rendered (which is common), an apparent windfall from a large project may actually be leaving you in a lurch in the meantime when expected profits don't make up for bare-thin cash flow margins. Sometimes you might still be in a good place, but an emergency expense or natural disaster wrecks everything.

For these reasons, it's essential to use cash flow forecasting. This process is basically the same as crafting a short-term cash flow budget, but with cash flow forecasting you're looking ahead at months, quarters or years to come. 

Projecting cash flow variables ahead of time can help businesses better track and allocate assets, as well as protect their solvency and ability to meet obligations. For instance, adjusting cash flow expectations to account for upcoming seasonal changes could prevent a harsh winter and high energy costs from creating balance sheet problems. It's also a good idea to construct forecasts for when large debts or loans come to bear. If unexpectedly slow revenue or late payments should affect cash flow, the ability to make those debt payments could be threatened.

All told, cash flow budgeting is a must for businesses. It provides valuable insight into operations and financial management. Yet it can be a complex process with all the different factors that must be considered. If interested in improving your cash flow management, talk to Comerica Bank today about services and products that can assist.


This information is provided for general awareness purposes only and is not intended to be relied upon as legal or compliance advice for your business.

Read More

Ways to Build Value in Your Business

April 12, 2019 by Comerica Bank

Pretend you’re the buyer

The key to building value in your business is to plan the process in a systematic way, whether you are aiming to grow the business or groom it to get a better price from a buyer.

Whether you just want to build a stronger business or you are looking ahead to the day when you might want to sell it, it helps to think of your business through the eyes of a buyer:

  • Identify any weaknesses they might see in your business and what you can do about them.
  • Think about the strengths that may attract them and how you can reinforce these strengths.

Work on stability

The longer your business has been operating, the easier it could be to sell, provided it has a solid track record. So it’s important to:

  • Keep well-documented business performance and tax records.
  • Document business history and projects completed or customers gained.

Develop reliable markets

A strong history is reassuring, but buyers will be more interested in the future. Make sure you can:

  • Show evidence that your main market(s) are growing or at least stable rather than declining.
  • Demonstrate you’ve taken steps to change your market position, if necessary. For example, a motel may be able to grow by making steady improvements to its facilities, moving up market and, as a result, increasing its prices.

Nurture a stable customer base

A well-managed customer database is one of the most valuable assets as it can be used in many ways for marketing and gaining referrals. Some steps you can take include:

  • Improving and updating your customer database.
  • Measuring customer retention rates and customer referral rates.
  • Implementing a customer loyalty program and referral incentives. Buyers will want to know that key customers won’t leave if you do.

Secure your cash flows

Stable future cash flows are critical to the value of a business. Buyers will want evidence of reliable revenue streams. You can make sure of this by:

  • Building more diversity – therefore, resilience – into your customer base if you are too reliant on a few major customers.
  • Looking for ways to develop more revenue streams by adding extra services or products and lock in stable revenues through customer loyalty programs and contracts.

Refine marketing tactics that work

Review the marketing tactics that have been particularly successful. That way you aren’t only refining them, you are demonstrating them to potential buyers. Here are some strategies you might consider:

  • Documenting your marketing strategy and your promotion plan tactics for the next 12 months.
  • Demonstrating how you measure all marketing to identify the best and eliminate what is not working.
  • Identifying what you are doing to expand your markets and distribution channels.
  • Listing some still unexplored areas that could offer potential, such as a better website or social media marketing. 

Maintain tight financial control

Excellent financial management will show up in your credit history – something you can be sure a buyer will check out. Make sure you:

  • Keep improving your money management skills through cash flow and profit forecasts and budget reports.
  • Show you understand and monitor the key performance drivers in your business.
  • Demonstrate that you have credit management under control and that your average debt collection time is at least as good as the industry average.

Develop great business systems

Good business systems add considerable value to any business because they allow you to spend more time working on your business rather than in it. They also make the transition to new ownership much easier.

  • Prepare your business as if you are planning to franchise it.
  • Start building an operating manual that documents all processes in simple, easy-to-understand steps.
  • Show how good systems enable faster training and enable staff to cover for absent employees.

Grow your brand

A buyer will see significant value in an established and respected brand that differentiates your business from competitors.

  • Work on developing a brand that captures the essence and unique selling points of your business.
  • Take any necessary steps to enhance or reinvent your branding.

Protect your intellectual property (IP)

The IP your business owns can add considerable value to your business, but only if it is well protected.

  • Review the US Patent and Trademark Office (USPTO) website. You should make sure to protect your logo and brand as a trademark.
  • Consult a patent attorney or IP expert about protecting any designs, inventions, copyright material or other IP that will add value.

Build strategic alliances

Strategic alliances can be an important source of growth and added value.

  • Consider what extra skills and resources you lack to exploit opportunities you are missing.
  • List and approach businesses that could help you gain work your business couldn’t normally deliver on its own.
  • Contact businesses that have more extensive distribution and sales channels.

Lock-in key employees

Dedicated and experienced staff can be a key asset in the eyes of a buyer, especially if they’ve helped you create a valuable business.

  • Ensure you provide opportunities for career progression and use incentives to align pay with the value that your staff create.
  • Make your business an attractive place to work. Good working conditions and competitive wages will help to retain skilled staff.
  • Look for people who can create value for your business, and managers with transferable skills who can help you build growth.


Successful business owners are those who are always looking for ways to build value in their business. Even if sales and profits are good, it’s not wise to rest on your laurels. Continually look for ways to make improvements, and when you do, always try to consider them from the point of view of someone who might want to buy your business. Using this technique will not only ensure continual improvement in your business, but it will prepare you if a good opportunity to sell it does arise.

Next steps

  • Talk to us about cash flow management and how we can help maintain tighter control on your finances.
  • Use our cash flow forecast guide and template to determine your financial position.

This information is provided for general awareness purposes only and is not intended to be relied upon as legal or compliance advice for your business.

This article is provided for informational purposes only. While the information contained within has been compiled from source[s] which are believed to be reliable and accurate, Comerica Bank does not guarantee its accuracy. Consequently, it should not be considered a comprehensive statement on any matter nor be relied upon as such. 

Read More

How to Manage FX Payments

April 12, 2019 by Comerica Bank

The fundamentals of foreign exchange (FX)

To make the most of your exporting venture, it’s important to have proper payment systems set up, as well as an understanding of the current exchange rates. Make sure you’re aware of economic policies such as interest rate changes and inflation. If the FX rate changes when importing or exporting, you could end up either paying too much for imports, or not getting enough for exports. You need to know which FX method suits your business best. That way you can lower any risk as the dollar rises and falls.

It is essential to get to grips with the fundamentals of foreign exchange. A strong U.S. dollar is great for importers, whereas a weak U.S. dollar is helpful for exporters.

Key payment decisions

You’ll need to decide if you’re going to charge for your goods in US dollars or the foreign currency where they’re being sent. Your customers will also be interested in getting the best possible exchange rate on their purchases.

Comerica has a number of funding options for exporters. The volume of daily global FX is larger than the combined value of worldwide equity, debt and other markets – at over $1 trillion!

Comerica Foreign Exchange Services can help you get your business banking accounts set up to handle foreign exchange payments. They’re also on hand to help you manage them, providing assistance with:

  • What methods you’ll use to counteract FX movements.
  • Assign these methods to each market you trade with.
  • Note your targeted rate or goals for exchanging currencies.
  • Follow through with your strategy and then review it as market conditions change.

It's important to minimize as much risk as possible to avoid losing money. The exchange rate will move between the time you sell and the time you have to receive payment. You’ll want to counteract these FX movements by entering financial contracts that protect against expected or unexpected fluctuations in currency exchange rates. This is known as hedging.

We can help you manage your global transactions in real time with Comerica GlobalTRADE Web®.

Online trading

If your business sells online, it means you’re open 24/7. It’s important to have exchange rate information at your fingertips. We can provide this with Comerica eFX®. It’s a secure, online trading system that gives you convenient, round-the-clock access to the foreign exchange market. You’ll have the flexibility to control trades, administer payments and create and download customized reports. Our FX Resources also include educational foreign exchange information and useful links.

Forward contracts

This means locking in a fixed exchange rate and settling at a future point in time is a way to hedge your FX exposure. Forward contracts can be used for any expiry date within one year and with any amount of foreign currency.


Markets don’t always stay the same – trade, relationships, politics, technology and businesses change. Make sure you’re constantly reviewing your foreign exchange strategy to give your business the best chance of successfully managing U.S. dollar fluctuations.

We can help with our foreign exchange services. An FX professional will work with you to go over your strategy to ensure it fits your company’s resources and appetite for risk.

Next steps

This information is provided for general awareness purposes only and is not intended to be relied upon as legal or compliance advice for your business.

This article is provided for informational purposes only. While the information contained within has been compiled from source[s] which are believed to be reliable and accurate, Comerica Bank does not guarantee its accuracy. Consequently, it should not be considered a comprehensive statement on any matter nor be relied upon as such.

Read More

Choosing Payment Terms for Your Business

April 10, 2019 by Comerica Bank

Getting paid correctly and on time by customers can be a constant frustration for business owners. Communicating your terms is the best way to ensure you aren’t out of pocket or left chasing debtors.

Setting your terms of payment

Your terms of payment let customers know when and how you expect to be paid. Setting your terms and informing customers about your expectations gives you better control over your business and a useful method for resolving potential payment issues.

Setting terms of payment shouldn’t discourage regular or new customers from doing business with you – it can pay to give customers a number of different options.

Remove any barriers to a sale

Encourage customers to buy from you by removing barriers to the sale. Make purchases as easy as possible through a variety of payment methods, including:

  • Cash or check.
  • Bank deposit.
  • Online money transfers to your bank account.
  • Debit or credit card payment.

Take the time to become familiar with all these options and their relative pros and cons.

You might, for example, decide to accept only major credit cards, offer a discount for cash payments or give your staff leeway to negotiate cash discounts if customers request them.

Know your industry’s norms

It’s worth researching the generally accepted payment methods in your industry and the terms your competitors use. This doesn’t mean you have to follow suit. You may be able to spot a gap or opportunity to be more flexible. The following examples could help you build a competitive edge:

  • Feature more payment options than most competitors.
  • Provide quicker and easier ways to pay.
  • Offer a discount for cash deals that give you immediate cash flow and protect you from credit payment defaults.
  • Advertise a discount for online purchasing, as this has lower costs for your business than conventional transactions.
  • Offer longer payment terms in return for a slightly higher price.
  • Investigate faster and more convenient ways to pay using the latest smartphone technology.

Offer variations for payment

There are numerous terms you can offer to your customers to choose from. Sometimes it’s best to use a method that works for both of you.

Payment in advance

Some businesses, such as ones operating over eBay or other auction sites, require payment in advance to provide protection against possible online fraud.

Customers first pay the purchase price (including shipping costs) into your bank account. You then wait for the payment to clear before sending the goods or supplying your services.

Be wary of relying on faxes of bank deposits or email confirmations not sent directly from the depositing bank as proof of payment.

Progress payments

These can be useful if you’re working on a lengthy project, such as a building or software development program.

Progress payments serve two important purposes:

  • They provide a regular cash flow to pay running costs.
  • They protect you against total loss if your client goes bust.

Normal practice involves building progress payments into contracts, which should be based on measurable milestones.

Early payment discounts

Early payment discounts can encourage customers to pay on time. They’re typically more useful on higher margin products or services, as the discount will have less impact on your profits than thin-margin products.

For example, if you offer customers a 60 day credit, consider a 5% discount if payment is made within 30 days.

Some customers will try to claim discounts after the due date. It’s in your interests to politely, but firmly, point out your terms of trade. If you don’t stick to them, your customers won’t either.

Contracts and debit orders

Businesses that offer regular services, such as gyms and accounting firms, can benefit from offering customers a set annual (or longer) contract. The attraction for the customer is a price that’s typically lower than paying for each visit or service.

Spreading the cost over 12 monthly payments can also make it easier for them to manage their budgets. Meanwhile, your business benefits from a regular cash flow. Requiring the customer to set up a debit order also eliminates any time you would spend chasing down payments.

Selling on credit

Selling on credit terms can expose your business to delayed payments or outright loss, which can seriously disrupt your cash flow. Some helpful rules include:

  • Developing or adapting a credit application form – your bank manager can help with the details.
  • Asking customers for business references and permission to run a credit check.
  • Setting agreed credit limits.
  • Clarifying your payment terms – 30-day and 60-day terms are the most common.
  • Explaining any interest charges you’ll impose on late payments.
  • Getting your customers to sign acceptance of your conditions to prevent future arguments.
  • Monitoring any overdue payments or orders that may breach agreed credit limits.

Choosing your payment terms

By now you should have a strong idea of what payment terms could suit your business. Remember to run your choices past your accountant, bank manager and lawyer for their input.

Bear in mind that your terms should attract customers, not turn them away. For example, if you don’t accept credit cards or add a surcharge for credit card payments, you might lose out on easy sales. In this case, weigh the extra costs of accepting credit card payments against the business you might otherwise lose. It’s ultimately your decision.

Communicate your terms to customers

Whatever payment methods you go with, be sure to communicate them clearly in your terms of trade and in your business signage. For example, don’t frustrate shoppers who arrive at the cashier to discover that you don’t accept credit cards.

This information is provided for general awareness purposes only and is not intended to be relied upon as legal or compliance advice for your business.

This article is provided for informational purposes only. While the information contained within has been compiled from source[s] which are believed to be reliable and accurate, Comerica Bank does not guarantee its accuracy. Consequently, it should not be considered a comprehensive statement on any matter nor be relied upon as such.

Read More