Tag Archives: accounts receivable
What the holiday season means for credit
The holiday season is quickly approaching and that means it will soon be the busiest season of the year for many of your clients. Most businesses are preparing for the influx of sales from Black Friday, Cyber Monday and the end of Q4 leading up to major gift-giving holidays like Christmas and Hanukah. As Holiday shopping ramps up, businesses have been increasing their inventory dramatically.
What does this mean for you?
While this may not apply to the service-side business customers, your retail customers are most likely investing a significant amount of money right now in the months leading up to the holiday season. By growing their product stock for the holiday rush, they will be looking to negotiate more flexible payment terms or delay their payment to account for the pre-season costs.
What should you do?
While these businesses may be strapped for cash leading up to November and December, it won’t last long. Once shoppers head out to make their holiday purchases, your customers will have plenty of cash on hand to pay 
off outstanding debt. The one problem is you are not the only person trying to get paid. This means you need to assert yourself as someone they will want to prioritize. The goal is to get on your delinquent customer’s payment schedule. Make your business a priority so that you receive payment between November 15 and December 15. Chasing the debt after December 15 will be unsuccessful because many employees will be away for the holidays and it will be significantly easier to push payment off until the beginning of the year.
If you are in the middle of a debt collection campaign, emphasize the importance of paying the debt when there is an influx of cash flow. Check with your sales team to see when they last visited the delinquent customer . They most likely will have an insider insight to their stock levels and current order quantity. Remember to always do your research first before getting on a call with a customer.
Accurate Invoices and Statements Get You Paid
Increase your profits by reducing errors
At C2C Resources we offer a powerful web-based accounts receivable management system we call Profit Maximizer.
With over 70 years of experience in commercial debt collections, we’ve learned how to streamline processes to increase profits.
Profit Maximizer benefits our customers by housing all their A/R details in one place that can be accessed at any time from any place.
Profit Maximizer provides multiple import options including:
• Direct link with QuickBooks including automatic sending & updating
• Reports that offer multiple viewing options
• Collection letter templates ready to send via email, fax or mail
• Follow-up phone call scheduling to ensure prompt communications
• Notes for storing details of each communication
• Collection timeline for effective and timely communication
There is no extra cost to our customers for using Profit Maximizer. We offer this web-based accounts receivable management system in an effort to increase profitability in-house.
What Makes a Good Debt Collector?
As a business owner, your collection call team will lead you to increasing cash flow. But is a good debt collector born with “it†or taught “it� For small businesses and start-ups, finding the right person on the team is particularly important because often team members wear multiple hats; only needing to step into the role when needed.
We think the right person has a combination of the right personality traits and proper training. Don’t always go for the sales person or accounts receivable person on the team. While they may be directly related to the process, they may not have the personality needed to deal with potentially intense situations.
When considering a team member, look for the following traits:
-Â Â Â Â Â Â Â Â Â Problem-solver: Often driven to find a solution, the problem solver is going to approach the situation with unique ideas. They will be results driven, even if the debtor becomes upset during the process.
-Â Â Â Â Â Â Â Â Â Self-motivator: Getting on a call is nerve-wracking because the debt collector does not always know how the debtor will react. By having someone with a keen sense of self-motivation, they will be driven to get the work done.
-Â Â Â Â Â Â Â Â Â Tenacity: If a debtor is persistent with providing reasons as to why they cannot pay, the collector will need to be just as persistent to make sure that the call ends with an action item of next steps in the payment process.
And, provide the following training:
-         Selling: The debt collector on your team needs to be able to prove to the debtor that they must pay. This is very similar to a salesperson’s role. By providing the team member with proven tactics you can prepare them for the most challenging calls.
-Â Â Â Â Â Â Â Â Â Customer Service: While it may be a good idea to pick the most tenacious person on the team, they also need to have good customer service skills. Being too controlling during the situation could turn the customer off and lead to no payment. The ideal candidate would have a good balance.
Finding the right person on your team to handle debt collection calls goes beyond the ability to pleasantly interact with customers. It requires a combination of skills to be effective.
Do you have the right person for the job on your team?
The Beauty of a Merchant Statement
Merchant Statements can help you in your business
Does your new customer do a meaningful amount of credit cards sales through her business? If so, you need her Merchant Statements in your client file right from the start. Here’s why:
Taking on a new customer is a new credit risk you’ve chosen to take. From the first day you meet her, you discuss your credit policies, make your terms clear, put agreements in writing, shake hands and hope it will be a profitable, long-term business relationship with nothing but smooth sailing ahead. Then one day down the road, she requests an increase in credit.
Such a request could be a good thing or it could be a bad thing. Maybe their sales for your product increased. That’d be great! It could be that they’re shifting their business away from a competitor. That’s a perfectly valid reason to request an increase. However, it could be that sales are way down or that a competitor has terminated her credit privileges. Not so good. But how would you know unless she volunteers the information?
This is where the Merchant Statements come in. If you request 2-3 months worth of merchant statements right at the start of your business relationship (when your customer is most open to providing them), you’ll have a powerful benchmark sitting right there in your customer file ready for just such an occasion. When she requests an increase in credit, you request another set of Merchant Statements to compare to your first set. Are credit card sales up or down? If sales have declined, is it minimal or significant? What?
Request Merchant Statements right from the start of your relationship. Keep them in the file for future reference and use them to make informed decisions.
Ways to Avoid an A/R Dispute
Wouldn’t you love it if you never had to experience an accounts receivable dispute?
While it may be unlikely that you’ll dodge that bullet 100% of the time, you can reduce the number of disputes by confirming a few pieces of information with every client right from the start.
Thoroughly discuss your policies with new clients making sure they understand your credit terms.
Make it a habit to call your customer after shipments are made to confirm that it arrived. Ask them if they received it in the condition they expected and if the invoice is correct. This is especially important for first time customers or for large balances. This way, you eliminate the possibility of a late dispute, which is likely nothing more than a stall tactic.
Be pro-active by requiring written purchase orders. POs help to keep the details straight while making it easier to match up paperwork and invoices. Since everything is spelled out on that one form, any disputes that arise may be more easily resolved.
In the event of a dispute …
When a dispute is brought to your attention early, it’s far more likely to be a valid one. Don’t respond to it until you’ve listened intently and gotten all the details. Your customer may have a legitimate issue, maybe not. But you won’t know if you don’t hear the entire story.
Certainly there are customers who will use a dispute as a stall tactic. If that appears to be the case, you may want to put your focus on getting the undisputed portion paid, especially if it appears you’ll have some significant sorting out to do for the disputed portion.
It may be your best option to make a payment modification if that works for you. Make sure you explain your accounts receivable policies again so you can avoid future disputes and past due invoices.
Most of the time, disputes can be avoided by a simple follow up phone call once the goods are delivered. Once your customer sees how seriously you take your business and your reputation for good service, he’ll likely fall in step and take paying just as seriously.
Avoid disputes with great communication. Touch base every step of the way!
4 Steps to Successfully Extending Credit
As a business owner, you know how your Accounts Receivable impacts your bottom line.
Not every industry is the same but traditional estimates suggest that for every dollar you have as a “non-performing” asset, you’d need to bring in three dollars in new sales to offset its effect. Given that economic times are tough right now, it’s possible that your sales efforts may not be generating the results they used to. Between that and a tight credit market you may find it tough to expand your business or even stay afloat.
It’s often said, “A loan well made is 90% collected”. Success in A/R starts with a solid credit extension policy. Follow these 4 steps as a foundation:
1. REQUIRE a Credit Application: As you know, credit applications are used to help determine the credit worthiness of the applicant.
2. VERIFY through processing: For a Credit App to be useful, the information must be verified. Through processing you’ll want to confirm the corporate identity, contact vendors and request references. You may even consider pulling a credit report on the principals of the company. If you can’t verify any point on the credit app, discuss it with your potential customer. If he’s not willing to wait while you process the application, this may be a red flag.
3. EVALUATE the credit: If the results of processing lead you to extend credit, we advise keeping the terms short initially. As your client builds a payment history with you, you can lengthen the terms. If you are feeling uncertain of extending terms to your potential customer but you still want to do business, consider requesting a ‘personal guarantee’. It will obligate the individual as well as the company for repayment of the debt. If your potential customer is unwilling to personally guarantee the account in exchange for credit, you may want to reconsider doing business with them.
4. REQUIRE down payments: This is a great way to secure yourself when extending terms. If you can get enough money up front to cover any costs or capital outlay, you will minimize the damage done should the account go bad. Determine what your cost is and then try to secure at least that much as a down payment. This way, your customer has vested interest and is more likely to follow through with payment-in-full.
Follow these steps for a solid credit extension policy.