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Name of author Rick Baker, P.Eng.

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When you struggle to collect accounts receivable

by Rick Baker
On Jul 13, 2011
When an employee feels unprepared to collect money owed to your company something important has been missed.
 
The key is: seek out and find what has been missed.
 
Here are some things that are often missed:
  • No written process for collection. Collection should not be viewed as a single-employee function or even a department function. It is an 'enterprise' function. The exercise of thinking collection through and writing process out is important. Collection is not a problem when clear actions are taken at all the steps that 'precede the due date'…good credit process, good contracting process, good invoicing processes, etc.
  • Failure to set goals and metrics for measurement of collection success. Goals and metrics should span the hierarchy, from C-level through to the employee with the keyboard and the phone. Without collection goals and action metrics, often, collection becomes a fire-fighting exercise. Under the firefighting mode the task importance is escalated and that places [undue and often extreme] stress on the employee. Situations of escalated stress reduce employee performance and results.
  • Failure to make collection a shared priority…i.e., providing training and training-by-example. Collection is one of those tasks that are viewed as unpleasant. Often it is not delegated properly. For example, it is generally a mistake to delegate a task when the 'donor' of the task [the boss] can not or has not performed the task with success. Often, collection is simply handed over to the employee. That places the entire burden on the shoulders of the 'recipient' of the task [the employee]. Some/most people learn from watching others. Most people appreciate knowledgeable support…to backstop their efforts, to bounce ideas off, etc.
  • Employee not suited to the collection task. People have areas of personal Strength, i.e., Strength = Talent + Knowledge + Skills. Sometimes the collection person's Strengths are not tapped properly. If that's the case then the collection person needs to change the way collection work is done. That may mean the company's collection process needs to change to suit the incumbent employee. Sometimes the collection person's Strengths do not align with collection work. That means the person should not be performing collection work.
  • Failure to place a high-enough priority on collection. For example, many businesses rely on 3rd parties to handle cash-flow problems. Many businesses go about it this way: "If Clients don't pay then we don't pay our suppliers". This approach provides a series of band-aids, which cover up collection problems and reduce the likelihood collection problems will be handled. So, when the collection must be done it is always a piece of firefighting work.
  • Issues around Corporate Culture: Paying debts when debts are due is an admirable way of going about business. For any business this is a double-edged sword. And, both edges should be sharpened at the same time. I mean, a business needs to look at how it pays its suppliers at the same time it looks at how it is paid by its Clients. This is a matter of Integrity…which for us is about consistency, not about judging what's right or wrong [i.e., we do not use the word Integrity to judge right from wrong]. If the prevailing corporate culture accepts dragging accounts payable then it will be very difficult to excel at collecting. Conversely, companies that excel at paying suppliers on time have Clients that pay on time. Both edges of the sword are sharp.
When businesses want to do better at collection, a good starting point is Values.
 
Values-Culture-Communication-Value. It starts with Values and it ends with Value. When we truly deliver Value to Clients, Clients are more inclined to pay on time.
 
Here is a link to our V-C-C-V philosophy
 
Here is a link to our definition of Integrity
 
I hope the above thoughts are helpful.
 
Footnote:
Steps to Consider When Collecting A/Rs

Tags:

Delegation & Decisions | Entrepreneur Thinking | Pay! - a philosophy about money

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Sales Tweet #258

by Rick Baker
On Jul 13, 2011
Sales Tweet #258 Don’t just get by, get more.
 
The Thinking Behind the Sales Tweet
That’s an appeal to those among us who are unmotivated. None of us is destined to just get by. Regardless of the difficulty we face we can do more than get by. As Napoleon Hill said – at the very least we can adjust the way we feel about and our reactions to the situation.

Tags:

Abundance | Thought Tweets

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