Will the cheque arrive today?
Is another phone call for payment going to upset the customer?
• The life blood of all commerce is cash.
• A business can survive a dip in profits (even short periods of losses) but no business can live without cash.
• It is essential for a well run business, offering credit to its customers, to have a well managed ‘Credit Operation’.
• If anything, cash-flow should be managed with more care and resources than profitability.
• Credit Management has one principle objective; to see that the customers pay for the goods or services they have received.
• Until the customer pays a ‘sale’ is a gift and the supplier is exposed to a loss of the full value of the goods plus the disruption and replacement costs.
This is a simple assessment of ‘credit control’. Getting paid is of course never that straight forward – the people who pay are customers so the conflict between needing the cash and needing the customer is a constant worry. It is this anxiety that creates the appearance of an ‘untouchable aura’ that so often surrounds a business’s credit operation. It is critically important but is shrouded in myths and fantasies – Shine a bright powerful light into this dark corner of business and bring to bear fresh new ideas on all of its activities:
• Cash collection – Manage payment don’t force it – For example, introduce pre-due customer care calls.
• Sales – Rank customers by payment performance – Add credit information to sales resources.
• Dispute Management – Don’t waste time, resources, and money just because you’re right and they’re wrong – The customer will always win in the end; he has the goods and the money.
• Risk assessment – Understand the customers as people not sets of historical numbers – Why do they do what they do?
• Bad Debt – It happens! – Time, resources, and money spent after insolvency are wasted on anger and resentment not reducing the loss.
• Legal Management – Don’t let the ‘legal niceties’ interfere with your business – But be prepared should you need to take action or defend yourself.
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