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When is a sale a sale?

When the services are completed and you send an invoice?

Okay, that may be when you book the sale in your accounting ledger, true.

Consider this…

A sale is not a sale until the money hits your bank account.

This is not how we do it in accounting unless we are running a cash business.

I have witnessed many businesses get aggressive in selling just to report impressive top-line growth.

What gets missed are these things:

  1. Time it takes to collect.
  2. Customer satisfaction.
  3. Credit worthiness of your customer.
  4. Your Gross Margin (I will explain…).
  5. The accuracy of your invoice.
  6. Did you fulfill what was agreed upon?
  7. Follow-up.
Time To Collect

The longer it takes to collect the less likelihood you will collect.

On a graph it will look like a Black Run downhill ski slope. As time goes on the percentage declines drastically.

Again, a sale is not really a sale unless you can collect it!

Customer Satisfaction

What the heck does customer satisfaction have to do with getting cash in the bank?

Well, when you think about it, an unhappy customer/client will likely resist paying you on time.

This loops back to number 1 above, “Time to Collect”.

This is a toxic cycle where an unhappy customer ignores your invoice and then refuses to pay down the road.

One way to avoid, is an outgoing customer satisfaction survey at the point of sale or shortly after.

Unhappy results can be nipped in the bud before it is too late.

Credit Worthiness of Your Customer

Have you done a credit check?

I remember checking the books of a business in a small town that sold electronics and home appliances.

Their sales were terrific! As in, off the charts for a small-town store.

The problem was that (on further examination of their accounts receivable) the sales staff were paid solely on sales commissions. It did not matter if the customer paid or not.

Credit sales were accepted often without background checks.

We discovered a TV had been sold to a fellow in prison! 😊

Hmmm, try collecting that one without backup!

Can these really be considered sales? More like store theft…

Your Gross Margin

Look at your Gross Margin as a main Key Performance Indicator by product line every week/month.

I know that this has less to do with, “when is a sale a sale” and more to do with cash in the bank.


Because if gross margins are declining it means:

  1. Discounting is happening.
  2. If discounting is happening, margins will be less, and perhaps not enough to cover your fixed costs.
  3. It also could mean that the business is less competitive and getting desperate to make sales at a lower margin.
The Accuracy of Your Invoice

Sales invoices should be sent out with 100% accuracy and fast. At the point of sale or rapidly after.

If you send out invoices that are inaccurate, your customers may, again sit on them, and refuse to pay.

The longer they are outstanding, remember the likelihood goes down that you will collect.

Did You Fulfill Your Agreements?

If the expectations of the sales transaction were not met, or there was any underperformance, then your customer/client may refuse to pay.

And often they do not tell you when they are irritated by underperformance, They just do not pay.

Again, a sale is not sale until the money hits your bank account.


When should you follow-up on your sales?

Within days.

Ask the correct person (usually an accounts payable clerk at your customer’s office) if they:

  1. Received the invoice.
  2. Have any questions?
  3. Is the invoice accurate?
  4. When can you expect payment?

By being proactive you set the stage for early payment.

The follow-up on their promises!

And keep following up. With persistent, firm kindness.

The old cliché “the squeaky wheel gets the grease” is applicable in getting paid on your receivable.

Remember, a sale, from a business point of view, is not a sale until it is in your bank account!

Thank you for reading…