We have been in contact with every single customer who has an overdue balance and we know when the payment will be in our bank.
As simple as this statement is I am sure most organisations could not answer yes to it, this is a key function of what a professional credit function is all about. Making contact with customers and getting a firm commitment from every customer on every single call – otherwise you are wasting your time.
Every single balance on your ledger must have some collection method associated with it. It is up to you to decide what is appropriate for your business and follow through accordingly.
The cash flow statement is becoming the most important exercise in businesses and when cash is tight and the banks are being really strict in their granting of credit, being able to forecast with accuracy what cash is coming in so you can control the cash going out is vital.
This should be a Credit Control function and you should be able to put dates and amounts beside all of your customers if you are properly in control of your ledger.
The truth is that a lot of credit controllers simply do not have time to make the required number of calls and when they do make the calls they fail to get a clear commitment – they must agree how much is going to be paid, how it is going to be paid and exactly when it is going to be paid. This is what effective telephone collections is all about.
A simple way to achieve your required result is to develop strong working relationships with your key customers so you agree exactly what happens and when. Then at the bottom end you should look to automate the process as much as possible – cash in advance, cash on delivery, standing order (for fixed amounts) Direct Debits for variable amounts. Then the credit journey is to convert all the customers in the middle to one list or the other – that is your picture of success.
My advice is that you should have a clear picture what your ledger will look like at all times and be able to project with accuracy what cash will be in on a weekly basis. You should create your perfect ledger and spend your time working from where you are to where you want to be – that will bring satisfaction and a job well done.
Have another look – are you really communicating with your customers?
Do you have the resources to make the required number of calls?
Do you know your percentage of calls to contacts?
Do you differentiate between the two?
If you answer “No” to any of the questions above perhaps you should consider either outsourcing or insourcing for the resources you need to get the results you want.
There are no magic wands when it comes to collections it is about performing all the tasks at a level of excellence and then applying persistence, persistence, persistence.
If you enjoy the job, love the challenge and are getting the required results and managing to keep you customers, keep up the good work. If not, get someone else to do it.