Give me some credit

Keep your eye on the receivables

I’m sure this is one of your main headaches and it is probably getting worse as strains on the economy increase.

Who is accountable for your organization getting paid? This is a similar question to who is accountable for sales in your organization. As, in most cases, we have all accepted (even if it's just as something catchy to say) that “Everybody is a salesperson”, by extrapolation, the same should hold true for collections: “Everybody is a collector”. I truly believe that everybody in an organization should be selling. It may not be products, it could be goodwill, it could be positive publicity, it might be referrals, it might be keeping your eyes open for new business opportunities to call in to the sales guys. Everybody should be contributing to increasing the top line of the company that pays their rent, food, tuition, gambling debts, whatever. Then we have the professionals: The sales force. These people are actually paid to sell. If the organization is set up properly then a sizable part of their compensation is related to how much and how well they sell. So why do we even need credit control? Don’t allow a sales force culture that shuns responsibility to collect evolve in your organization. Fact: nine out of ten salespersons have issues with using the words “buy” and “pay” in the same sentence, especially when addressing a customer or prospect. Fact: nine out of ten uncollected invoices are the result of a lukewarm reference to credit terms at the closing phase or a lukewarm credit control process. Fact: many salespeople consider that their job is done once the deal is closed. This is not true. Think of somebody introducing a new friend into the circle. The introducer is responsible if the introducee has a history of violence and ends up bashing the circle.

In order for your invoices to be collected, you need a close relationship between Sales and Accounts and salespeople that believe a sale not collected is not a sale, it is a liability. If the other guy is not going to pay, let him, nay, encourage him to go and not pay your competitors. In fact, give him a contact number.

Where does credit control begin? Well, contrary to common opinion, it does not begin after the credit period has elapsed. In fact, it begins before the deal is closed. In these times of corporate drought it is increasingly difficult for sales professionals to be selective with their customers. By all means revisit whatever standards can be revisited EXCEPT credit. If during the initial contact phase you get the impression that the prospect will be a credit issue, drop them. Don’t waste any more time. During the fact-finding meetings, depending on the selling techniques the sales rep is trained to use, the question of payment needs to be addressed. Make it very clear that you are willing to work with the customer to arrive at a solution, but your company expects to be paid on time. There are many ways to say this but that is a different post. By the way, this does not mean you are discussing price yet. Refer to credit periods, mention payment on more than one occasion and observe the prospect. Even a rookie salesperson should be able to tell if they are sitting opposite a prospect for the provision-for-bad-debts line. So, the sales force is heavily responsible for making sure the company gets its money.

Having said this, the sales force needs to be diplomatic. Credit control, on the other hand, can be more candid within the framework of its mission. To quote a moth-eaten cliché, it’s still all about the follow up. Many companies have procedures in place that dictate how they pay. Some say they issue payments on the x^th of each month. I have even seen a flowchart that dictated no payment is made until the supplier has made third contact with reference to the outstanding amount. So do spend some time making sure you have a procedure in place for collecting your money. You should have a procedure for your existing customers and one for new customers. New customers should get a friensdly call from Accounts (not credit control) as soon as they receive their first invoice. Have you received our invoice? Are all details correct? Are the charges clear? Do you need any additional information? This saves the “Send-me-the-statement-there’s-something-off” call. As soon as the invoice is due, Credit Control calls and informs that the invoice discussed on the 15^th is now due, how will the payment be made? Thank you. This shows the client that you are serious about collecting. Then you wait, send a written reminder and failing this you stop credit and pull out the legal notice. You log all these. You monitor payment behavior and watch for pattern changes as you do with sales. The sales rep should be ccd on written communication to their client. They can then also follow up with the client and help the process along. Also you look rather amateurish if you turn up for a friendly sales call and don't know your company has threatened your eleven o’clock meeting with legal action. If you have not automated all or most of the above, seriously consider entering the present.

Don’t let invoices go unpaid for three months and then call up people yelling.

By the way, you are not doing a small company a favor by letting them lag with their payments. They will just end up not having the cash to pay.

And make sure that everybody fully understands that selling something costs money, even before the service or product changes hands. You are starting from a loss position. By identifying potential bad payers, you are minimizing that loss. We can help you set up the process.