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Some of the
benefits:
- Collect more
money from debtors faster, more
often, with less cost and
stress!
- Your cash flow
improves
- Avoid future
problems
- Improve client
goodwill
- More efficient
use of resources
- You & your
staff learn, retain & do more
due to our methods
- My training also
leads to flow on benefits in other
tasks you perform
- Iam very
focussed - on helping you get
better results
- I come to
you - convenience and
relevance
- Experienced debt
collection staff also
benefit
The
decision to optimise your business debt
collection is a very important
one.
Debt collection is one of the
most neglected tasks in business
today.
Debt collection really begins as soon
as your company accepts an order – or
perhaps even earlier at the quoting or
prospecting stage. Instead of only
focusing on collecting “bad” or overdue
debts, efficient debt collection is a
means of completing the sale. After
all, you haven’t made a sale until you
have been paid.
Good cash flow is one of the keys to
business survival and indeed,
prosperity. It is a key
foundational building block of a well
run enterprise. Good cash flow is like
having a healthy bloodstream – cash is
in some respects the lifeblood of a
business. You are of course well aware
of the problems which occur because of
a poor cash flow. Improving your debt
collection can be done in various ways,
not all of which are suitable.
It is also important to recognise
that debt collection is part of the
sales process.
Why is this so?
One reason is that collection problems
can have their roots somewhere in the
sales process. We like the thought of
getting more business and know too well
the temptations that can bring. Poor
business is often generated with
inadequate concern paid to the
likelihood or ease of debt
collection.
Another often-neglected aspect is that
debt collection staff are in a sense
part of the sales team because they
interact with customers. The activities
and attitudes of debt collection staff
can directly impact on clients in a
positive or negative manner. Your
clients are extremely valuable both in
terms of Goodwill on your balance
sheet, and because of their “lifetime
value” – the value to your company of
future income. In addition, it is much
more costly to get a new client than
service an existing one.
Debt research has been conducted in
Australia and key recent findings have
included:
1. Small to medium businesses (SME’s)
have inadequate debt collection and
risk management procedures.
2. A high incidence of bad debts and
lack of credit control play a key role
in SME failure, where failure
occurs.
3. 42% of SME’s in Australia do not
follow their own credit policy
guidelines and procedures for chasing
outstanding debt.
4. The most effective means of
preventing bad debt write off is early,
consistent follow up.
Debt collection is recognised as being
one of the most neglected areas of
business. The time and cost involved in
effective debt collection often deters
businesses from setting up efficient
procedures to address the issue. Other
reasons for poor credit management
include a general fear of damaging
customer relationships, a heavy
reliance on “handshake” deals and a
general opinion that bad debts are
unavoidable.
Another key finding has been that
frequency of taking action is low and
timing is usually too late.
Ideally then, a business needs
an efficient debt collection process
that meets the following basic
criteria:
1. Well-thought-out system designed to
speed up collecting money.
2. Use and implementation of the
system.
3. Understanding and support for the
system in all relevant divisions of the
company – including Sales.
4. Regular management reviews.
5. A system which promotes client
goodwill.
1. Well-thought-out system designed
to speed up collecting money.
The key to success in many aspects of
life lies in the thinking. Thought
leads to action. Making an effort to
design a good system for your debt
collection will save you much time,
stress and energy down the track. It
will improve your cash flow and protect
client goodwill. A good system is more
likely to be used by staff. Where
possible it should be simplified.
2. Use and implementation of the
system.
We can all recall situations in life
when good systems are not used and bad
habits continue. There have been times
when we have read books, attended
seminars and suchlike and yet not
continued with carrying out what we
have learned. It is important that we
are people who Do. There are various
reasons people do not use new systems
and Management needs to be
vigilant.
3. Understanding and support for the
system in all relevant divisions of the
company – including Sales.
Debt collection is an essential role
within business and is part of the
corporate “body”. If it is neglected
then the whole body suffers. It is
important the collection role be
properly integrated with the rest of
the company. Sales and Credit
Management should work much more
closely together and staff within each
department should be aware of the key
considerations. Sales Management should
take a key interest in the debtor’s
ledger – much valuable information can
be gained, including aspects of sales
targeting, profitability and
opportunities.
4. Regular Management
reviews.
Business changes. Essential business
roles need close attention. It is
essential that credit management is
regularly reviewed.
5. A system which promotes client
goodwill.
Efficient credit management sends an
impression to clients the company is
organised – this contributes to the
sales process because people have
greater confidence in the rest of the
company activities. Clients are also
more likely to realise that they cannot
“take advantage”, leading to an
improvement in cash flow. Some
companies can even go one step further
and turn the collection process in to
something that produces goodwill and
increases sales.
DEBT COLLECTION
SYSTEM
A good Debt Collection System has
several main parts, which include:
A Credit Policy.
We understand the need for tight credit
control. In today’s economic
environment businesses are taking their
lives into their own hands if they do
not install prudent credit checks and
controls.
Two of the most important steps for a
business that extends credit are:
1. Create a formal credit policy.
2. Implement this policy so it is part
of the day-to-day running of the
business.
A Contact Management
Program.
A contact management program is needed
to keep track of every contact you made
during the Debt Collection Process, who
was spoken to, what they said and when
they agreed to pay by. This should also
provide a reminder of when to call
again.
A Debtor Database.
Obviously you have one of these. The
information it contains however should
be relevant and ideally allow relevant
input from other departments.
Collection Letters.
These should range from friendly
reminders to demanding letters. It is
very important that these are not only
correctly worded, but also used at the
correct time, in the right way.
Telephone Scripts.
I use this term loosely because top
class collection is not mechanical or
parrot like. However there are things
which are best said in certain ways, or
in a particular order.
Legal Documents.
You will need legal documentation to
help you with the collection process
when taking, or threatening, legal
action. This may include standardised
Solicitor form letters
Staff
Training.
Continued staff training and
development is needed to ensure that
standards are maintained and improved.
We can always do better. Relief staff
should be well versed in the debt
collection process in case of sickness,
absence or other issues.
SUMMARY
The credit management process is
closely intertwined with other key
facets of running a business. You may
find some aspects of this material
challenging. Change does bring
challenge. Progress demands it.
Money is such a key ingredient of
running a business and it affects
almost everything we do. If you do not
master the money it will master you. A
farmer has a better chance of getting a
good crop if he treats his land
properly, sows good seed at the right
time and ensures there is a demand for
what he is sowing.
So it is with credit management. If you
do not set up and adhere to good
systems you will have problems.
Another point which I want to discuss
is that of basic business attitudes.
Many credit related problems can be
traced back to basic attitudes.
We know the feeling of “wanting
business”. Often the fear of lost
profit or opportunity leads to the
writing of bad business. There are
varying degrees of the “business at any
price mentality”. It is fundamentally a
defeatist attitude.
The solution to this problem can be
found in deciding on some key goals,
writing them down in a sound business
plan and acting on them. The key is to
decide on the right goals and have the
right attitude. Decide not to accept
poor business from clients. Decide to
get good quality clients and profitable
business. Decide to be the best for
your clients. As you can see – this
boils down to quality attitudes and a
belief that you and your clients
deserve the best. And what’s more – you
are going to go out and achieve it!
You will then find that even more of
your credit control problems disappear
and that you are no longer running an
unofficial financial
institution.
Need
someone to collect your
debts?
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