ForConstructionPros.com

Hey, you just rented 10 units at your standard rate to a new customer, and these are the biggest units in the fleet, which have the top rental rate. In this environment, that is great news. Or is it?

Renting those 10 units might be a big deal or not, especially if you wind up in the 120 days on the monthly AR schedule, and if you post-bill the rentals it is even worse. You can rent the entire fleet at standard rates but let's face it, the only thing that counts are the collections received in a timely fashion.

Saying you are going to strive to collect in a certain amount of time and doing it are two different things. If you don't have credit procedures, rental application forms, have a credit approval process in place, get credit card information and track the outstanding balances it will be difficult to stay in control of collections.

Every rental company employs different credit policies. Some are very strict and will cut off the customer if they fall behind in payments. Some are more flexible and use a more flexible policy as a marketing tool (as long as they have the capital base to make it work). And some do not have adequate controls in place and always seem to have cash problems.

Rental company employees have to understand how the billing and collection process works. If you pre-bill the rentals the days outstanding are one thing, but if you post-bill the rentals you have to add another 13-18 days to the outstanding days because the unit has been in the field 13-18 days before you billed it. So if an invoice shows up in the 60-day column and you post-bill, then it is really closer to 75 days outstanding. Big difference.