Receivables Management

Collect Your Receivables or Die!

 

Most providers of training services to small business focus on sales.

Why?

Because sales is sexy!

But the fact is, all business problems are not sales problems.

Let me repeat…all business problems are not sales problems!

I started out in business in 1996 with about US$1500 in cash and no loans. Therefore, working capital was very very tight, to say the least.

So, we had to get credit and I made a special commitment to myself that I would properly honor the expectations that service providers and employees had – to be paid within reasonable time for their goods and services.

Since we were going to blend chemicals and import expensive ones, this was going to be a challenge. We were lucky to receive credit from our main supplier, and others; plus we got some good clients (and one particularly large and significant one) that we gave moderate credit terms while we got very generous terms from our main supplier.

We managed our working capital well.

We grew and prospered by astutely balancing our cash flows. In this regard, we became very good at collecting from people to whom we sell and at the same time, taking advantage of whatever credit we could get. We are so good that we have this process well understood and have not lost a dollar in bad debt in recent times. In fact, about four to five years ago we lost some monies (through bad debts) owing to us by three customers. Two of these were due to carelessness from one of our officers and the other was due to the failure of one of our customer’s business, a partnership, leading to us suppliers being denied payments until the matter was settled in court. The surviving partner tried to save its reputation by offering creditors 50 cents on the dollar and so we got back 50% of what was owed. Since then, we have not lost one dollar due to bad debt!

But collecting money owed can be challenging!

It is said that one of the main reasons most businesses fail is due to undercapitalization. That is true, but the problem must be understood. Depending on how much capital the business has, it can struggle or fail without adequate working capital and the problem is strongly affected by how well it collects monies owed to it and how well it can get good credit terms from suppliers.

To make matters worse, some people can be very hard to their creditors, not because they cannot pay, but due to personality and administration problems. Some years ago I was at the office of a small business operator and he took a call from his secretary. The call was from a person to whom he owed money and after spending about 15 minutes on the phone this businessman was angry at his secretary for putting the call through. He thought the caller was wasting his time calling about his money!

How would you handle this situation?

Second example: An accountant friend shared with me the fact that his boss would pay attention to invoices supplied by his friends and contacts and simply ignore others. And this was not due to lack of funds. So, what would you do?

Most textbooks will emphasize steps like credit checks, formal paperwork, offering discounts for early payments, etc. These are not very successful in the real world and sometimes when credit checks are being done, the prospects cannot wait for paperwork to be completed as they need the product urgently.

You have to understand that many receivables management problems are communication and procedures problems. I will teach you to understand the dynamics of what is going on and how to manage and collect your receivables.

Our online and class room receivables training will help you improve your collection drastically.

This will be updated by the end of July 2012 and you can contact us for more information on how we can help you.