You arrive home. Water on the carpet. Bath upstairs overflowing. Someone’s left the taps on. You rush upstairs.
Question: What’s the very first thing you do when you get to the bathroom?
1: Turn the taps off?
2: Pull out the plug?
3: Call for help?
Answer: You’d turn the taps off. Right? To stop more water getting in. Then pull out the plug, to let the ‘old’ water out.
The Debtors Ledger
You open the ledger. Too many debtors in 90 days.
Question: What’s the very first thing most people do?
1: Turn the taps off? (follow up the accounts just due?)
2: Pull out the plug? (action the large old debts?)
3: Call for help? (engage debt collectors?)
4: Panic? (do something/anything else they can to put it off?)
Answer: Most people select 2. But the initial focus should be #1. (as in the bathtub.)
The way to get money in quickly in all businesses is to
focus (initially) on the ‘fast money’.
New debt. Accounts where the only amounts due are fairly current invoices. These account customers aren’t ‘bad’, just slower paying their accounts than your trading terms dictate. Accounts that don’t have any older balances due. No problem ones. Just the ones that are ‘just due’.Only just due for payment.This is applying Principle 1.
So, if you want fewer debtors (water) in your Debtor’s Ledger (bathtub)
turn the taps off!
(Action the “fast money” first, the debt’s that are just due.)