Is this resolution just another fantasy, like losing weight and getting healthier? Like 3xing your revenue? Like scaling?
I don’t think so.
Resolving to completely do away with Accounts Receivable (AR) is very specific and you can achieve it by making 2 key decisions.
Before we get to those 2 decisions, let’s look at why we would want to zero out AR.
AR costs you money. And it is a cost without any return.
AR on your books means you are working (using your own assets) before you get paid. You are providing value to your clients or buyers in advance of receiving the fee.
This is like going to the grocery store, buying the ingredients for a nice dinner, cooking and eating the dinner, and paying the grocery store 30 days later.
Not gonna happen, right?
Why should your company provide the ingredients, cook the meal, and serve it long before you get paid?
When you shop for anything, from cars, insurance, clothing, medical care, and so on, you pay at time of purchase.
You pay with cash, a card, or a loan. The seller gets the money, whether you have it in your own bank account or not, and you pay the lender back over time.
Lenders love you because they make money from your purchase using the credit they’ve extended to you.
Why should your professional or knowledge based expertise behave any differently?
Your firm, the law firm, accounting firm, designer, SME consultant, fractional CXO, coach, and so on, does not make money from lending.
If the client pays 30 days later, you have become a lender—for free!
This is wrong on every level.
Don’t come back at me with your objections. I’ve heard and reject them all.
All of those reasons are excuses for the buyer to delay payment and they cost you money.
Money that shrinks your own profit.
I hope you are now resolving to zero out AR this year!
The 2 Decisions
- Terms and Conditions (T&C)
Your company decides the terms and conditions under which you operate. You’ve seen hundreds of these long documents from companies you purchase from.
T&C also includes your requirements for completing the purchase. This is where you begin to achieve your resolution of zero AR.
Your company’s T&C must state that payment in full is due at time of purchase.
Period, the end.
No ambiguity.
Payment at time of purchases means exactly what it says. When the buyer says “Yes, I want to work with you” that’s the time. It is not when the work begins.
You’ll have to provide a means for the buyer to pay. This should be online via a payment processor. There are many payment processors to choose from. Yes, you will pay a fee. I guarantee that the fee is well worth the convenience, the security, and the fact that you will have the money in your bank within 3 days.
There’s one variation. If you selling an annual service and you are okay with the client paying one twelfth each month, you can require automated payments on the first of the month with the stipulation that if the payments stop the work stops immediately.
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Determine Fees in Advance
Obviously if the buyer is to pay at time of purchase, you will have to tell them what their cost is. This forces you to do away with hourly billing or deliverables that are TBD.
Your company benefits from predetermined prices in two ways: first, it allows you to get rid of AR and second, you will quickly learn how to connect your prices to your profit.
Why? Because as you create predetermined fee offers, you’ll look at your costs and multiply them by your target profit margin. You can be sure that every sale delivers the required profit.
Predetermined fee types in order of power and profit:
High Power and profit: IMPACT Based Pricing with customized options and fees proportional to the impacts you create. The more significant the impacts, the higher the fee. And customized always creates better impacts than off the shelf.
Medium Power and Profit: Tiered pricing. This is off the shelf with three options that include different tasks and provide a range of outcomes from premium to midrange to basic. Not nearly as profitable as customized, but often a good transition from hourly or deliverables to predetermined.
Low Power and Profit: One-size-fits-all for a fixed fee. This is something that doesn’t require any customization, that is pretty easy for your firm to do and has a clear benefit to the buyer. The time frame should be brief, like a week or two. No add-ons or subtractions.
Start Today
I’m sure you know from experience that anything you put off “until there’s time” or “until we’re ready” tends to fall off the radar and not happen.
If you truly want to get rid of every dollar of Accounts Receivable in 2026, take the first step today.
Here’s the first step: revise your internal documents to include the new T&C.
Payment is due at time of purchase.
Until you write it down and circulate in writing within your firm it won’t be real.
Then you have to create offers with predetermined fees.
What’s one service you can deliver for a fixed fee that fits many clients? Just one to start! Give it a name, describe 3 benefits to the buyer, and price it.
Announce it on your website, via your newsletter, and on social media and add it to your email signature.
Congratulations, you have just started on the path to zero AR!
I’ll be returning to this resolution over the coming months. I offer these tips, doable in a short time, to get you started.
If you want to accelerate reaching your goal and get help creating options with predetermined fees, we can talk about how a one-on-on engagement with me will get you there.
I invite you to schedule a meeting for that conversation.
Susan
PS: If you think of someone who’s experiencing a lot of stress due to their company’s AR, forward this newsletter to them. You’ll be giving them a ray of hope that they can get out of the never ending cycle of AR, borrowing to pay their own bills, and more AR.
PPS: Connect with me on LinkedIn.
