Learn more about the best practices and increase your cash flow.
Learn more about the best practices and increase your cash flow.
Jeff DiMatteo from the Worcester Business Journal shares some very helpful tips for anyone struggling to get paid from customers during this economic crisis. He gives 4 tips that business owners can use to get their money from customers that are not responding to payment requests. Something we all need right now!
Some things you can do to keep track of and increase your cash flow as well as improve your accounts receivables might include:
I recently recorded a webinar for BusinessWeek called Managing Cash Flow that is about handling cash flow with two other people, Tom Taulli and Tim Berry, both very knowledgeable on this topic. I am quite excited and think it is very relevant information especially with the Wall Street Drama going on and business struggling everywhere, especially on Main Street. I thought it would be helpful to anyone struggling with their business right now.
Please let me know your thoughts and I hope it can help you!
When you first start a business your personal credit is what is used to determine the types of credit or if any credit will be extended to you or your business.
Most Entrepreneurs or new small business owners don’t realize that their personal credit is crucial to their ability to successfully run a business. When you first start a business your personal credit is what is used to determine the types of credit or if any credit will be extended to you or your business.”
As you start to build your business credit, your personal side will phase out. So it is important to start the process sooner than later.
Most people I talk with think that if they ask new or potential customers to fill out a credit application or sign a contract that they will lose the sale. This could nto be further from the truth.
If a customer balks at filling anything out, you should take a step back and really look at the situation. Don’t be so eager to “make a sale” that you jepordize your business by extending credit where credit is not due.
When you blindly extend credit your giving the message that you don’t care about your money, or your business.Â When you give out credit without making sure a customer is credit worthy, word gets around and soon all the good credit worthy customers will be at your competition and you will be stuck with the customers who knew they could get easy credit from you.
SLOWLY. Slower than slow. When I started my Credit & Collections Association in 10 years ago, one of my goals was to help to change the negative reputation bill collectors have.Â With more and more news stories focusing on the negative stories and not enough focusing on the positive stories, this is a slow process.
I know this isn’t much but I think that just by being the opposite of what is expected we are making a move in the right direction.Â It isn’t wind from a hurricane, just a little breeze but hopefully it will pick up!
What is expected:
How we should be:
This is an oldie but a goodie.
Professionals in the collection business get used to hearing excuses as to why someone canâ€™t pay an outstanding bill or at least canâ€™t pay according to terms. But, even seasoned and experienced collectors can get thrown on occasion.
The clients for an International Specialist in training for accounts receivable kept track of the unusual excuses they heard during the month of May. Three judges, once they were able to control their laughter, selected the top three.
If you have a business and have customers that owe you money, there is one thing you can change about how you run your business that will make you more money today. Every business owner knows how important it is to keep their customers happy and coming back for more. If your customers are happy and coming back for more, they will tell everyone they know about you and your business. You canâ€™t buy that kind of advertisement.
If you want to make one change to increase your profits, implement a credit policy. You donâ€™t want customers that donâ€™t pay on time or at all coming back for more, so by implementing a credit policy you can avoid that and have good paying customers that will pay on time, spend more money and spread the word about you and what you have to offer.
Customers that are approved for credit, will buy more if they can pay later, so make the process as streamlined as you can. Catering to a potential new customer is good business, so the easier you make it for them to spend more money with you, the more money and sales you will have. One thing that is often overlooked is how to prevent future credit or non-payment or late payment issues, donâ€™t wait until you have bad debt to implement a credit policy, take control of your bottom line now.
This seems so unusual not because of what happened but maybe because Verizon is supposed to be a huge company, with values and someone you can trust. hmmmmmmm
A quote from Steve Fannell, the fluffy dogs owner:
“The point is that Andy has never had a Verizon account. We were just curious why this showed up,” Steve Fanelli said.”
On page 113 of the issue on stands now of U.S. News & World Report is an article called “Collecting Debts can Save Your Business”, a follow up article to a couple of weeks ago.Â If anyone gets this magazine, check it out. I am also wondering if anyone could pick me up a copy at a news stand and send it to me? Â I canâ€™t find that magazine anywhere around here, someone just stopped by with a copy which is how I saw it. Pretty exciting,
Hi! I’d like to ask a few questions.
1. What are the responsibilities of the credit and collection department?
2. What roles do the line and staff people play?
Credit managers are in high demand right now. The economy is forcing business owners to look at other ways to make money when they arenâ€™t making as many sales because of the state of the economy. Collecting from past due customers is one of the most resourceful ways to make money without making more sales.
5 great qualities that will help a credit manager be successful.
There are many books about this out there on this topic, a couple are â€œBecome the Squeaky Wheelâ€ and the â€œUltimate Book of Credit & Collectionsâ€Â you might also check with other business owners and ask about their credit & collections department, they should all be similar but will be a bit different based on the industry or the business.
Sales people and everyone else in the company should be aware of your credit policy.Â Sales people need to be very involved with the credit department so that they donâ€™t oversell to people who may not be able to afford the payments
What is the most expeditious way to establish business credit without the need for a personal guarantee?
Thank you! Eric
You should apply for credit under your business name with vendors you are currently working with or using. Also, pay your accounts on time or early and take advantage of early pay discounts, this will boost your credit and save you money at the same time. Try applying for smaller credit lines with vendors you have been doing business with and paying on time, the longer you do business with them, the more credit you can ask for as long as you are paying early or on time. Also, check out my blog for specific posts and tips about this topic that can help you with your business credit. Good luck!
The Better Business Bureau in CT has had an increase in complaints against what they are calling “rogue debt collectors.”
As Americans struggle to cope with rising debt loads, complaints to Better Business Bureaus about some debt collection practices increased 26 percent in 2007, says the Record Journal.
According to Connecticut Better Business Bureau President Paulette Hotton, so-called third party debt collectors are going far beyond what the law permits them to do.Â With this in mind, make sure you and your collectors are educated.Â I recently gave a tele-conference that was very well attended and I had very good feedback on it, it was called “Understanding the Fair Debt Collection Practices Act”.
Failing to properly train collectors is a top reason companies get sued.Â Donâ€™t let this happen to you, learn as much as you can about what constitutes a violation of the FDCPA and how you can avoid making those mistakes.
When you are calling debtors day in and day out, you learn a lot about them.Â Many debtors share many personal stories with bill collectors, trying to explain their situation or looking for mercy in the way of payment plans or discounts.
There are some things you can look for when talking to debtors that will give you an indication that they are falling more and more behind with all of their bills or that they are in more debt than just the bill you are calling about.
1. Regularly missing payments or paying late, debtors might tell you they can’t pay their mortgage, or are behind on their car loan or utilities.
2.Â Paying only the minimum on credit cards.
3.Â Using credit cards to live, such as for food and gas or to pay a bill.
4.Â Taking money from their 401K to pay bills.
5.Â Spending their savings or not having a savings account.
Listen to your debtors, make notes on their accounts. Be aware of when you need to pick up the pace or offer different payment options.
In my experience many businesses do not have credit management plans or any credit policies in place. Managing your business cash flow can be the single most important thing that can make or break your company, no matter if you are a new business or have been around for many years.
There are some things you can do to make this credit management easier. The first thing is to manage your receivables, or hire someone to do it for you. Managing your receivables means you keep an eye on them, you stay on top of payments and run aging reports, and look at them! Another thing you need to do it make it as easy as possible for your customers to pay you, offer different types of payment options such as cash, credit or online payments. One of the most important things you can do to manage your business credit successfully is to have a credit policy in place with payment terms and that you can stick to. It doesn’t help you to have a policy that you don’t follow or that doesn’t work for your business. You need to do the same with your collection procedures, make sure you have collection policies in place that are easy for you to carry out. You also don’t want to forget accounts payable, keep your eye on your payables reports as well.
The skills and resources you will need in order to successfully manage your business credit are:
Signed and filled out credit applications
Full knowledge of the FDCPA and any state or other Federal collection laws
Skip-tracing or location skills or resources
If you find these steps overwhelming or something you are not educated about and you don’t want to dive right in, you may want to hire someone to be your credit manager, collections person or accounts receivable clerk to handle these aspects of your credit for you. If you decide to hire someone else to take on these tasks for you do some research and talk to other business owners who may have done this. You will want to have a clear understanding of what a bill and/or account collector does, for example, they collect payments by phone or by using letters to collect payments on past due invoices. They may negotiate repayment plans with customers and help them find solution to get the bills paid off in full.
Who will be your credit manager, collector or in charge of the credit department? Pick one person to be in charge of all credit applications and reports. Write that name down so you can talk to that person about this responsibility and the job and make sure they are willing to hold that responsibility. Make sure everyone knows who this person is so they can go to them about anything credit related.
Get credit applications. Where to get them: online, office supply stores, CD’s or books of business letters and forms, local printing companies. Download free credit applications at http://www.MichelleDunn.com/free-from-michelle or if you have a copy of my Ultimate Credit & Collections Handbook, the check IS in the mail – you have a CD in the back of the book that has examples of different credit applications you can print out and use. If you want a copy of this book with the CD, visit my website store or amazon.com.
Get some collection letters ready. Many businesses like “series” of letters, normally starting off with a friendly reminder and gradually getting stronger as payment is not forthcoming. You can find letters online, on the CD in the back of my Ultimate Book or in my book Debt Collection Letters and Forms, how to get your customers to pay or write your own.
Research and choose a collection agency. You want to find an agency that you are comfortable with BEFORE you need it. When choosing an agency make sure that they are fully acquainted with the nature of the goods or services that you provide. If an agency is familiar with your industry, it will be better suited to handle complex situations that arise during collections.
Do not place accounts with more than one collection agency. Make sure that if you decide to change collection agencies, the account is only be worked on by one service.
As you write your policies you need to understand your credit risk. Credit risk is the risk of loss due to a default on a contract, or the risk of loss due to someone not paying you as agreed. If you don’t demand payment up front you are leaving yourself open to credit risk.
Your credit risk is the time in between when the customer leaves with your product or receives your service and when you get paid.
Some steps you can take and include in your policies to reduce your credit risk are:
Get a signed personal guarantee
Offer month-to-month credit
Offer ship-to-ship credit
Ask for a security deposit
Get a 50% (or more) deposit on every order
Now that you have a clear picture of what you want this credit policy to do for you, take a look at your business mission statement. You want to write a short concise mission statement for your credit procedures. Every business has a mission statement and you want to apply that to your credit policy to write a mission statement for your cash flow.
Your credit procedures mission policy should state what the goals for these instructions are, what the goal of these procedures are, who is responsible for all the credit decisions and functions and then the actual policies or steps. For example, your policies or what you want your credit procedures to accomplish might be:
Your payment terms and conditions
Processing new customers that want revolving credit accounts
Using credit applications to check credit worthiness
Joining a credit bureau in order to pull credit reports
Setting realistic credit limits
Dealing with any past due customers
When and how to use a collection agency
Now that you know why you need a credit policy you need to come up with one that will work for you and your business. Some things to think about when sitting down to write out your credit policy steps are what you want your credit policies to do for you and your bottom line. The purpose of your credit policy should be to accomplish any of the following objectives.
I want my credit policy to:
Provide timely notification to any of my past due customers automatically to help my business eliminate old balances left on the books.
Outline steps and procedures that will provide my customers with options when they find themselves unable to pay in full or on time.
To provide my employees the steps to take when an account has a small balance due (interest, shipping, disputed item) in some cases a company might implement a rule that they write off anything under $10.00.
To provide step by step instructions to my credit manager when checking credit and setting reasonable credit limits for customers approved for revolving credit accounts.
Give us strict guidelines to follow on how to legally collect money due to us as a result of returned checks.
Have an automated system that will send out reminders to past due customers every week or two weeks.
Include the proper legal forms so that my business can keep customer credit card or debit card numbers on file with permission to automatically charge them at the time of an order or a specified date each month.
To have specific steps in place so our credit manager knows at what point an account should be placed with a third party collection agency and written off to bad debt.
Have steps in place in the event a customer’s order is held due to a past due balance, I want this to include notification to the customer and an easy payment option.
One thing you can do is make sure that forecasting is something you do for your business or ask your accountant to help you with this. Look for growth in real wages, which drives consumer spending, and which accounts for more than 2/3 of the US economy. Consumer spending is a huge indicator of what is happening and it also drives corporate profits which in turn affects the stock market. Look for changes in the economy that will affect your business and remember every business is affected differently and at different times during the cycle of a recession, or down turn.
Keeping up to date on foreclosures happening in your area and the areas you may sell services or products to is crucial to your business. You can make sure your business is protected by going over all of your accounts that you extend credit to, make sure they are in good standing and up to date on all invoices. If you have signed credit applications and are authorized to pull credit reports and/or check with banks and vendors on someone’s payment history, now is the time to re-evaluate each customer’s credit and credit limits. Look for things such as late or slower arriving payments, change or loss of a job, changes in incomes, change of address, and divorce. Take immediate action if a customers’ mail is returned and/or if the phone is disconnected. Many times when the economy suffers people lose their jobs, their relationships suffer, and they may move to cheaper housing or lose their vehicles. All of these things are factors that lead to your bill not being paid and can sometimes end in bankruptcy. The three steps you can take to help you in this situation are:
1. Review your accounts receivables weekly or at least monthly
2. Stay motivated by trying to collect as much past due money as possible
3. Stay focused; don’t let customer excuses veer you off track
As a credit manager or the owner of a business you should be able to answer the following questions or at least know how to find these answers if you want an effective credit management plan.
1. How do debt and credit affect my business?
2. Exactly what is my credit policy?
3. What makes a successful credit policy?
4. What is credit risk?
5. How do I turn prospects into credit approved customers?
6. How can I maximize my cash flow?
7. How do I handle customer deductions?
8. How do I handle customer excuses for late payments?
9. Why would I use a third party collection agency?
Your credit management plan should answer each of those questions; you and your employees should be able to flip through your credit policy to find out what steps to take in each of those instances. Having a credit policy can help you create a plan that answers those questions and gives you a guideline and steps to take in each scenario, helping your cash flow smoothly and avoiding much bad debt and frustration.
If you try to help your clients to have better credit polcies, you may want to share this blog post with them. Many of your clients and the debtors you are calling may be having credit problems because of the state of our economy. Here are three tips that can help them survive and help you collect more money.
If your not having trouble paying your bills now, you might in the coming months. As the economy sinks and the credit crisis continues, many businesses are closing and people are losing their jobs.
Top 3 things you can do right now to feel better about your situation.
1.Start a budget, use a notebook and create a budget based on your income and your bills. Get a book at the library or look online for an example of a budget.
You are responsible for your debts. If you fall behind in paying your creditors you may be contacted by a debt collector.
New and Experienced bill collectors must hone their negotiating skills.
Everyone who is trying to collect money, even if the amount was agreed upon at the time of the sale, seems to be required to negotiate. Most bill collectors, especially new ones, are not as effective at negotiating as they could be. I do know some of the characteristics of a good negotiator and of a good bill collector and wanted to post the things that they have in common.
Being a bill collector is a skill that takes time, effort and energy. To collect more money you need to work at it, invest the time learning the dynamics and science of negotiating and being firm.