Tough Times Trigger Changes

Times are tough. Your business is seeing a decline in sales and declining revenues. To make matters worse, your accounts receivable, which you’ve always relied on as a source of immediate cash, is not turning like it should. Delinquencies and defaults are up. The reserves are at record levels and the receipts are sluggish. The customers you do have are paying slower and you are afraid to scare them away.

You expect your sales team to get creative and find new customers. You expect operations to be more efficient and cost conscious. You expect your collection group to collect more money.

What does the collection group say? They’re doing everything they can. You can’t get blood from a turnip. If they tighten credit, they’ll drive off the customers. If they loosen up, delinquency will surely rise. What can they do differently?

Consider that very often, collection procedures do not change in good times or bad. In bad times particularly, senior management will demand more focus be put on the very past due columns. Everyone is hammering at twenty per cent or less of the accounts receivable that is made up of accounts either paying a little every month or are very close to becoming a legal or a collection agency assignment. However, this may have been the collection strategy all along. Perhaps the collection group has never tried to collect more current receivables.

It is also possible the collection group treats every past due amount equally, meaning that as much time is spent on small amounts as are spent on the larger amounts which equates to not enough time is spent where it belongs. The collection group may be spending too much time on non-collection issues. The sales group is eager to have the credit applications processed, the customers are looking for invoices and proof of deliveries, and they expect someone to respond promptly to credit rating requests. All of these responsibilities can drown a credit department. In these conditions follow up suffers and good follow up is key to successful collections.

This is where CreditPowers can help. We can evaluate your current collection trends and practices. We can provide tools that will improve collections and motivate the staff. We can provide a sure fire collection formula that will reduce delinquency. We can train the collection group and make them better collectors and we can help reallocate their resources so that they can be more productive.

For more information, e-mail us at patrickpowers@sbcglobal.net