The obvious importance of the collection of accounts receivable is, that a sale isn't a sale until you're paid, and that all businesses run on money. A less obvious but important reason is that of customer service and retention levels.

In most businesses the largest percentage of past dues are directly tied to something going wrong (Type II Systems Problems). Surveys have found that 70% plus of delinquent customers fall into this category. Whether the source of the problem is on the sellers' end, the customers' end, or due to the action / inaction of a 3rd party (direct ships, agents, the post office, transportation etc.) makes no difference. Until a problem is identified and corrected the customer will not pay, and those unpaid open invoices become an irritant and money drain to vendor and customer alike.

Early identification of systems problems and fixing them improves the cash flow and also represents an improvement in customer service levels. Better customer service equals higher customer retention.

When customers are current they're more apt to continue buying. The most profitable sale is normally the repeat sale. Remember the primary goal of the Completion of the Sale (Collections) is to keep customers current and buying.

Implementation

Some business executives are a walking contradiction. They expend time and money in sending their people to seminars / workshops and then they fail to get involved in bringing about improvement. Too busy fighting fires, I guess.

4 Steps in Change / Improvement

1. Expect resistance
2. Take baby steps
3. Keep shifting the comfort zone
4. Pay for what you want

Push against a dog and they push back, they resist. People do the same. When you're trying to implement something new you need to explain it and then ASK your cohorts why it won't work. Make up a "Fail List", reasons why the change / improvement won't work and then ASK for ideas on how to overcome the problems.

By allowing people to tell you why something won't work you give them a chance to vent, to release the natural tendency to push back. Then by coming up with ways to overcome the very problems they brought up, you give them a chance to think it was all their idea in the first place. You know, the ownership thing.

First steps on long journeys must be the hardest. Pace yourself when trying to change / improve on things. Don't try to get others in your organization to change EVERYTHING at once. Start small and as it works add a little more.

The place to start, in improving the credit and collection function, is collections. Simply by implementing a simple Daily A/R Contact Report you'll get a lot of mileage. Track calls made and reasons given for payments not being made within terms. Review of the report is important for any report not reviewed is a waste of time.

“I’d cry for the time I’ve wasted, but that’d be a waste of time and tears” W. Nelson.

It's amazing how people do those things that are being monitored; expect your cash flow to improve and repeat sales to go up with the use of a contact report.

Once they're halfway comfortable with that report, introduce the Systems Problem Log. In the process of identifying the source of things going wrong (Type II Systems Problems) and then fixing the business process to avoid the same problems in the future; people will come to see that they're contributing to higher customer service levels, customer retention and to the quality of business practices.

Change doesn't create stress, stress must be present for change to happen. Remember high school science when they talked about inertia? Basically inertia means that if something is standing still it's going to continue standing still until some outside force makes it move. People are like that. They get comfortable and while that's a great attribute in a chair, sofa or bed, it'll kill you in a competitive marketplace.

There’s a real good reason for dating your policies and procedures. You want to be able to tell when they were last up-dated. And if you think up-dating policies and procedures is not important, you my friend are too comfortable.

Once things are working pretty good, look for the next improvement. Go to seminars, guys like me need the money. Survey the customers, ask vendors, and pay your guys to think ... opps, that's the 4th step in Change / Improvement.

People do those things they perceive to be in their own best interest. Last time I checked, the first law of human dynamics was still in effect.

In asking people to make changes, you're crazy if you think they're going to put out 110% unless they understand how it will impact them. I'm not saying that you need to negotiate every nickel and dime change. What I am saying is that by setting up goals for the change / improvement and then by paying people to achieve those goals it becomes a win / win deal. The goals must be based on improved profitability. We're not talking change for the sake of appearances.

"What we hear we forget, what we see we believe, what we do we understand."

As busy as everyone gets, new ideas die a quick death unless they're put into action. Wait for a more opportune time and chances are real good you'll space it out.

Abe WalkingBear Sanchez is an International Speaker / Trainer / Consultant on the subject of cash flow / sales enhancement and business knowledge organization and use. Founder and President of www.armg-usa.com, WalkingBear has authored hundreds of business articles, has worked with numerous companies in a wide range of industries since 1982 and has spoken at many venues including the Shakespeare Globe Theater in London.

• 0 Comments

  

Comments

 Add your own comments

Name:

Email Address:

URL:
Remember Me? YesNo

Comments: (you may use HTML tags for style)

What next?

 Digg it

 Save This Page

 Subscribe to GetEntrepreneurial.com

 Leave a comment

Next Article: Home-Based Business vs. Second Job -- The Choice is Yours »

Previous Article: Autoresponders - Put Your Follow-up On Autopilot! »

Abe WalkingBear Sanchez is a GE Network Expert. View Abe WalkingBear Sanchez's profile or read more articles from Abe WalkingBear Sanchez. Learn more about the GE Experts Network.

Have an expert opinion on issues entrepreneurs and small business owners face everyday? Join the GetEntrepreneurial.com Experts Network and share your expertise with the community!

The new GE Experts Network is inviting seasoned entrepreneurs and small business owners to come on board and contribute small business advice to our community of aspiring entrepreneurs. If you have an effective way of generating sales or you know how to use social networking to connect with your customers, join us in providing wider entrepreneurial content that would benefit small business owners worldwide.

Click Here to Learn More >>

Related Articles

 Green Liquids to Make Your House Clean » Trendwatching: In an ECO-ICONIC world, visibility counts, for big and small products alike. Which, in the case of cleaning products, means exposure will...

 Lava Lamp Shot Glasses » CoolBuzz: They say after you have had your fill of booze, you might just end up seeing stars. But here's an innovative idea...

 Shirt History » CoolHunting: Re-Shirt is an Austrian-based company that resells second-hand t-shirts. What sets them apart from other online boutiques is that every shirt comes...

 Urban Mining » A recent Reuters wire story (picked up here in the International Herald Tribune) describes the new trend of "urban mining" - of...

Need more brand new promising business ideas and innovations around the world you wish you'd thought of? Visit CoolBusinessIdeas.com now!

Ever wanted to be the CEO of your very own Starbucks or Amazon.com? Fire your boss and be your own boss? Now you can, with BIZNESS! - the free biweekly business newsletter about new business ideas, opportunities and innovations from around the world. More than just new business trends, BIZNESS! helps the aspiring entrepreneur (you!) with small business advice, business tips, and entrepreneur resources and opportunities.

   Subscribe for free now!    

---