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Some of the benefits:
- Collect more money from debtors faster, more often, with less cost
and stress!
- Your cash flow improves
- Avoid future problems
- Improve client goodwill
- More efficient use of resources
- You & your staff learn, retain & do more due to our
methods
- My training also leads to flow on benefits in other tasks you
perform
- Iam very focussed - on helping you get better results
- I come to you - convenience and relevance
- Experienced debt collection staff also benefit
The decision to optimise your business debt collection is
a very important one.
Debt collection is one of the most neglected tasks in
business today.
Debt collection really begins as soon as your company accepts an order - or perhaps even
earlier at the quoting or prospecting stage. Instead of only focusing on collecting “bad”
or overdue debts, efficient debt collection is a means of completing the sale. After all,
you haven’t made a sale until you have been paid.
Good cash flow is one of the keys to business survival and indeed, prosperity. It is
a key foundational building block of a well run enterprise. Good cash flow is like having a
healthy bloodstream - cash is in some respects the lifeblood of a business. You are of
course well aware of the problems which occur because of a poor cash flow. Improving your
debt collection can be done in various ways, not all of which are suitable.
It is also important to recognise that debt collection is part of the sales
process.
Why is this so?
One reason is that collection problems can have their roots somewhere in the sales process.
We like the thought of getting more business and know too well the temptations that can
bring. Poor business is often generated with inadequate concern paid to the likelihood or
ease of debt collection.
Another often-neglected aspect is that debt collection staff are in a sense part of the
sales team because they interact with customers. The activities and attitudes of debt
collection staff can directly impact on clients in a positive or negative manner. Your
clients are extremely valuable both in terms of Goodwill on your balance sheet, and because
of their “lifetime value” - the value to your company of future income. In addition, it is
much more costly to get a new client than service an existing one.
Debt research has been conducted in Australia and key recent findings have
included:
1. Small to medium businesses (SME’s) have inadequate debt collection and risk management
procedures.
2. A high incidence of bad debts and lack of credit control play a key role in SME failure,
where failure occurs.
3. 42% of SME’s in Australia do not follow their own credit policy guidelines and
procedures for chasing outstanding debt.
4. The most effective means of preventing bad debt write off is early, consistent follow
up.
Debt collection is recognised as being one of the most neglected areas of business. The
time and cost involved in effective debt collection often deters businesses from setting up
efficient procedures to address the issue. Other reasons for poor credit management include
a general fear of damaging customer relationships, a heavy reliance on “handshake” deals
and a general opinion that bad debts are unavoidable.
Another key finding has been that frequency of taking action is low and timing is usually
too late.
Ideally then, a business needs an efficient debt
collection process that meets the following basic criteria:
1. Well-thought-out system designed to speed up collecting money.
2. Use and implementation of the system.
3. Understanding and support for the system in all relevant divisions of the company -
including Sales.
4. Regular management reviews.
5. A system which promotes client goodwill.
1. Well-thought-out system designed to speed up collecting money.
The key to success in many aspects of life lies in the thinking. Thought leads to action.
Making an effort to design a good system for your debt collection will save you much time,
stress and energy down the track. It will improve your cash flow and protect client
goodwill. A good system is more likely to be used by staff. Where possible it should be
simplified.
2. Use and implementation of the system.
We can all recall situations in life when good systems are not used and bad habits
continue. There have been times when we have read books, attended seminars and suchlike and
yet not continued with carrying out what we have learned. It is important that we are
people who Do. There are various reasons people do not use new systems and Management needs
to be vigilant.
3. Understanding and support for the system in all relevant divisions of the company -
including Sales.
Debt collection is an essential role within business and is part of the corporate “body”.
If it is neglected then the whole body suffers. It is important the collection role be
properly integrated with the rest of the company. Sales and Credit Management should work
much more closely together and staff within each department should be aware of the key
considerations. Sales Management should take a key interest in the debtor’s ledger - much
valuable information can be gained, including aspects of sales targeting, profitability and
opportunities.
4. Regular Management reviews.
Business changes. Essential business roles need close attention. It is essential that
credit management is regularly reviewed.
5. A system which promotes client goodwill.
Efficient credit management sends an impression to clients the company is organised - this
contributes to the sales process because people have greater confidence in the rest of the
company activities. Clients are also more likely to realise that they cannot “take
advantage”, leading to an improvement in cash flow. Some companies can even go one step
further and turn the collection process in to something that produces goodwill and
increases sales.
DEBT COLLECTION SYSTEM
A good Debt Collection System has several main parts, which include:
A Credit Policy.
We understand the need for tight credit control. In today’s economic environment businesses
are taking their lives into their own hands if they do not install prudent credit checks
and controls.
Two of the most important steps for a business that extends credit are:
1. Create a formal credit policy.
2. Implement this policy so it is part of the day-to-day running of the business.
A Contact Management Program.
A contact management program is needed to keep track of every contact you made during the
Debt Collection Process, who was spoken to, what they said and when they agreed to pay by.
This should also provide a reminder of when to call again.
A Debtor Database.
Obviously you have one of these. The information it contains however should be relevant and
ideally allow relevant input from other departments.
Collection Letters.
These should range from friendly reminders to demanding letters. It is very important that
these are not only correctly worded, but also used at the correct time, in the right
way.
Telephone Scripts.
I use this term loosely because top class collection is not mechanical or parrot like.
However there are things which are best said in certain ways, or in a particular order.
Legal Documents.
You will need legal documentation to help you with the collection process when taking, or
threatening, legal action. This may include standardised Solicitor form letters
Staff Training.
Continued staff training and development is needed to ensure that standards are maintained
and improved. We can always do better. Relief staff should be well versed in the debt
collection process in case of sickness, absence or other issues.
SUMMARY
The credit management process is closely intertwined with other key facets of running a
business. You may find some aspects of this material challenging. Change does bring
challenge. Progress demands it.
Money is such a key ingredient of running a business and it affects almost everything we
do. If you do not master the money it will master you. A farmer has a better chance of
getting a good crop if he treats his land properly, sows good seed at the right time and
ensures there is a demand for what he is sowing.
So it is with credit management. If you do not set up and adhere to good systems you will
have problems.
Another point which I want to discuss is that of basic business attitudes. Many credit
related problems can be traced back to basic attitudes.
We know the feeling of “wanting business”. Often the fear of lost profit or opportunity
leads to the writing of bad business. There are varying degrees of the “business at any
price mentality”. It is fundamentally a defeatist attitude.
The solution to this problem can be found in deciding on some key goals, writing them down
in a sound business plan and acting on them. The key is to decide on the right goals and
have the right attitude. Decide not to accept poor business from clients. Decide to get
good quality clients and profitable business. Decide to be the best for your clients. As
you can see - this boils down to quality attitudes and a belief that you and your clients
deserve the best. And what’s more - you are going to go out and achieve it!
You will then find that even more of your credit control problems disappear and that you
are no longer running an unofficial financial institution.
Need someone to collect your debts?
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