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CHAPTER 8 MASTERING YOUR MONEY

customers. So, even though you may be making great sales
and accounting profits, it is of little use unless you monitor
your AR and collect the money you are owed FAST.

So, you have to monitor your AR very closely every week.
The moment payment is due from your customers, you have
to begin chasing them for payment. The moment you suspect
that they may not be paying because of financial difficulty,
you have to immediately take legal action. In the event that
they do go bankrupt, creditors will be paid on a first come,
first served basis (if there is anything left).

If I sound threatening when I say you have to “immediately
take legal action,” let me tell you that I say so out of painful
experience. In the last 8 years that I have run my advertising
company, I have been saddled with bad debts of close to
$1million. I have learnt that in order to protect your business
against this, you need to have a strict credit policy. Only give
credit to reputable companies or government bodies. In dealing
with new companies, avoid offering credit and, if so, ask for
a bank guarantee. It’s better to lose a customer then end up
saddled with his debt (to you) because, as a middle-man
(advertising agency), you still have to pay the media owners
(where his ads are placed).

2) Inventories
Inventories are important to watch in manufacturing and retail
companies. They include raw materials, partially finished
products and finished products yet to be sold.

Having lots of inventory lying around for too long is no
good because it ties up cash that could be better put to use
elsewhere. Also, the longer the inventory stays, the faster its
value will drop.

SECRETS OF BUILDING MULTI-MILLION DOLLAR BUSINESSES 253