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Stop Waiting For The Money!
Some Tips on Receivables Maintenance
by F. Scott Wilson
My first credit job was dialing for dollars. The owner’s wife had previously handled collections, but generally called only when a repair contract was due, or when payroll was coming up. In short, she called after cash was needed, instead of acquiring it beforehand. Our bills, then, were late, and our creditors called us for delinquent payments.
Many credit departments still function on that basis, calling only after thirty days have elapsed beyond terms. At that point, getting the money collected requires handling an emergency of some degree, even if only the fact that the aging has, well, aged. Any customer service issues addressed this late usually have a fairly cold trail, complicating your attempts to get your client to resolve them.
Your role as a credit professional involves, to a great degree, helping your customer manage their cash flow with regard to your firm. In order to accomplish this, do the following:
1. Train the customer. On the first order, and on large orders, keep in contact with their senior payables person. That means the A/P Supervisor, not the Payables Clerk. Make sure they have and are getting everything needed to process payment. When dealing with government accounts, this is especially critical. Make sure they know your terms, and agree to them.
2. Act on broken patterns. Occasionally, a customer who always pays within terms, or discounts, will lag. The first impulse is to let them slide; after all, they’re reputable and may have had some of their customers pay them slowly, or experienced a problem of another kind. Don’t wait to call! These are your best customers, and worthy of prompt attention. On a customer service issue, they will appreciate your concern and willingness to help fix it. If their cash flow is poor, you might grant extra time to pay, but ensure they understand they must let your firm know right away when a problem arises. By the same token, don’t wait on future calls. If the pattern breaks, ask questions, fast.
3. Get them to commit. Many articles are dedicated to this topic alone; it’s that important. Press your contact for a firm payment date, then arrange to call back and confirm that a check has been mailed on that date, for the agreed-upon amount. [By the way, I consider a check number a booby prize. One corporate controller I knew gave out check numbers freely, then dodged calls for another month before paying. His previous employer bankrupted the week he joined our firm. Enough said….]
4. Follow up, follow up, follow up. Some customer billing cycles purposely include long delays, to benefit their cash flow. You can short-circuit this behavior, and get them to pay. If you fax an invoice, call the next day, or that afternoon, to confirm your contact has it in their hands. If they need to talk to someone in your Sales department, let Sales know, then let your contact know you have done so. Let them know you’re eager to fix the problem, and get their account current so they can continue purchasing.
The name of the game, then, is to let the customer know that their business is important to your company, and that you and your department notice and act upon issues right away. The customer service element is sometimes neglected in collections. Good manners and an eagerness to work with the customer go a long way towards getting them to pay you. You’ll also find that your customer will be much less likely to dodge your collection calls, when they realize you are calling to help. Your goal is to get them to pay your firm first; prompt action and excellent customer service skills go a long way towards making this happen.
About F. Scott Wilson:
One of our newest contributors, Mr. Wilson is an accomplished credit professional, with twelve years of experience in diverse industries. A specialist in the establishment and repair of commercial credit departments, his expertise has been invaluable in the reduction of bad debt and DSO for his employers. Mr. Wilson was also the first to implement automated credit scoring within the highly competitive forest products industry, and is currently wrapping up his qualifications for CCE certification through NACM.
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