As I was walking around the City this morning I was reminded of the need for good process, regular reviews and consistent performance by the “Good Table Manners” sticker, stuck to my elbow; The joys of a young family. The “check elbow for stickers” step will be added to the morning routine as soon as I get home, right up there with check the temperature of the shower before getting in (particularly if my wife has used it before me)

There was a study, relating to personal goals, done by a US university that proved the power of written down goals. If memory serves me well a written down goal or target is 80% more likely to be achieved. This is particularly true in business where the goal may be set by one person to be achieved by another. Writing it down removes areas of grey and helps communicate the task more accurately.

This approach is very important with any business critical function of which Credit Control is one. With this in mind, it is astounding how many companies muddle through Credit Control in crisis management mode with no real strategy or documented process that is followed consistently.

We have written a very short list of tips to appear in the Independent Cash Flow Management supplement produced by Media Planet tomorrow. I have expanded it slightly here, it is simple, but if you have nothing in place at present it can be used as a start point.  If you would like to talk some more, please get in touch 02071005978 or email info@tak-outsourcing.com

Define and document your process:

As a minimum, a Credit Control Process needs to have

• An Owner responsible for managing and ensuring the regular performance
• A defined start point, generally derived from the invoice date
• Clear subsequent steps that will be followed until payment is received
• A time bound plan for the course of action where payment is not received after a defined period Click for Debt Recovery Info
• Some measures, as a minimum Day Sales Outstanding should be monitored Click Here for DSO info and Calculator
• Diarised reviews of the measures and process effectiveness

Chase Method

Voice communication is the mainstay of effective Credit Control. Letter and email are generally only an option for low value invoices and great for follow up and confirmation of what has been said and agreed.

Start early:

Commence chase activity before the payment is due with a pre-emptive service call. If there is an issue it is better to discover and rectify before payment becomes overdue.

Clear escalation

A decision point after which Debt Recovery procedures commences is advisable. Delay can be costly, and in some cases has resulted in a loss that could have been avoided with prompt action.

Keep an eye on your customers

Changing circumstances can often reveal themselves first as a change in payment behaviour or a request for extended terms.  Automate some monitoring if budgets allow, where manual methods re used schedule a regular review to ensure you are up to date with the health of your customers. See our previous post on Data Audit and monitoring.

Finally

Ensure that the chase activity is performed as consistently as any other a time-bound operation. Credit Control is a critical final step in the sales process, a sale is not really made and closed until you have been paid.

Run the process for a period of time and then review against your measures, making adjustments if needed. If volumes are too much to cope with, ramp up resource with a temp or ask a service provider for support rather than let calling slip.

The faster you collect you cash, the lower the risk of you being caught by customer insolvency. Once they are gone, they are gone; generally with most if not all of your money and all of your profit, so a few extra pounds spent on adequate resources should pay back in the long run.

…is somebody else’s!

As I saw the torrential rain this morning I was reminded of a comment made by someone recently regarding risk assessment and risk mitigation. I don’t remember the detail but to illustrate, it was pointed out that Noah built the Ark before the flood. In the same vein, I wonder how many people leave buying a burglar alarm until after they have been the victim of a break-in.

Shutting the stable door after the horse has bolted is all too common. If one is lucky, the event serves as a painful wake up call however sometimes the knock on effect can be catastrophic.

There are two recent cases where the consequences could be far-reaching:

On Monday November 8^th, it was reported that that property firm ROK has gone into administration, following Connaught who went the same way earlier this year.

Both of these businesses were huge with numerous suppliers that will now not get their invoices paid. According to KPMG, In Connaught’s case claims from unsecured creditor’s run to at least £46m, furthermore 50,000 “lost” invoices have been uncovered, so one can only imagine that this number will grow.

The implication, according to the press, is that creditors will be lucky to see 1p in the pound. So a supplier making a modest 10% profit the effect of an unpaid invoice of £5000 would be:

Original invoice                                   £ 5000.00

Recovery at 1p in the pound              £     50.00

Bottom line impact                             -£ 4950.00

So at 10% profit £ 49,500.00 of sales need to be made just to stand still.

An analyst who declined to be named said Rok’s problems were unlikely to be related to its profitability:

‘Something behind the scenes triggered this, which is more likely to be cashflow than profitability,’ the analyst said.

Maybe this is the reason why there are reports appearing of large companies squeezing the supply chain for savings and asking for extended credit terms. When asked for credit, it is wise to stop and asses the reasons for which it is being asked and check the risk involved with the business you intend to transact.

It is too late for the creditors of Connaught and Rok,  the past cannot be changed, for them the flood water is either swirling about them and they are swimming for survival or they have drowned. For those that have not been affected by this one, as sure as death and taxes, there will always be company failures, and when they go there will always be victims affected in the same way as those of Connaught and Rok.

So, what can be done to protect your company?

Now might be a good time to review your credit management process from end to end and make sure the following aspects are in place:

• Account opening procedures are effective and provide a view on risk
• Ensure that there is a process for monitoring accounts once they are set up
• Make effective use of credit limits
• Review your collections strategy and credit control process end to end
• Ensure policy is communicated and being adhered to

If you are worried, don’t wait until you are up to you neck in water before you start building your life raft. Review now, or call us and we will carry out an initial review for free which will get you on the way. Click here to register for a free review

If you do nothing and get caught, don’t start crying as the flood waters rises, the tears will only make the water rise faster!

Simon Hampton

Director of TAK Credit Management specialists in cash flow solutions including:

Credit Control

Debt Recovery

Process Consultancy

Invoice Finance



A company of good standing, based  somewhere in the south of England, with a strong credit rating. Just the sort of company that you would not expect to get caught by such a simple scam as they will normally have policy and procedures to prevent fraud.

The fraudsters altered, without the knowledge of the company, the Companies House record of the registered office. This was changed to a to a storage unit in the North West of UK. They subsequently registered the fraudulent address with YELL.Com. Directors were resigned and new Directors appointed. They then went on a spending spree:

Goods ordered and obtained:

• Computer Equipment
• Mobile Telephones
• Fork lift trucks …x 8
• Range Rover

All of this was achieved without the company’s knowledge.

The fraud was uncovered before 2 BMW cars that had been ordered were delivered!

This is just one example of this type of scam that has been uncovered, the instances are increasing. As with any kind of risk, some proportionate measures to reduce the chance of being caught out are sensible.

We offer our customers a data audit and monitoring service. Such a service will check the details held by Companies House and credit referencing agencies are correct and then monitor and report upon any changes as the happen. It doesn’t prevent fraud, but it could alert you to malicious behavior before any real harm is done. Additionally it will help ensure that your credit rating is reflective of your current situation.

There are quite  a few sources of this kind of information, if you would like to know more about our offering then click to email me or give me a call on 02071005978.

It is inexpensive, easy to set up and will go some way to preventing you becoming a victim of this type of fraud. As a bi-product it will also ensure that your credit rating is correctly reflected by the popular referencing agencies.

We’ve all seen the sticker on mad Colin’s desk, you know the chap;

“…I’m mad Collin, I’m really mad I am; nutter; look look this sign says so…”

Well, here is an interesting observation. Normally we find Colin, or anyone else for that matter who claims to be mad, is clearly not mad at all. They maybe slightly eccentric, or desperate to engage with colleagues and to be seen as a fun person, have fun, but not really mad. (Hey, why do you hang around with mushrooms? They’re fungi’s to be with – boom boom, I’m here all week)

The mad people in a business are often the people running it.

The reason you know they are mad is

a) They NEVER talk about it and (this is a BIG one)

b) Their behaviour.

Here is my example. In the Sunday Times Business section this week, there was an article regarding late payment and the damage it causes to business;

“Late payers decide firms’ life or death”

The article appeared to be based upon an interview with the owner of a property maintenance company;

“All of my time is taken up with trying to get clients to pay sooner rather than driving my business forward”

Laments the Director, he is also quoted as saying:

“I feel extremely frustrated because if we had the cashflow that we had earned I would be able to reinvest it and we would be a much bigger company”

It also mentions that the poor proprietor is not taking a salary as he is concerned about cash flow.

So, here I am, the Director of a Credit Management business with a track record of helping customers improve cashflow and reduce bad debt by 25% – 30% very very fast, whilst enhancing customer relationships. I have a bundle of case studies and happy customers to back up my claim. Would you forgive me for thinking Christmas had come early?

At 09:01 I called, and got connected to the chap featured in the article. I have been selling services for a long time, so I know sometimes it can be painful to admit that one has a problem with ones own business. I believe I am reasonably skilled in the art of getting people to talk thought their buiness issues and craft solutions without making them feel incompetent or threatened in any way. Furthermore I felt that as the chap in question had poured his heart out to a journalist writing for the national press it wouldn’t be to hard to talk through the issues and have a constructive discussion about freeing up his time to grow the business, speed up his cashflow and enable him to pay himself.

Unfortunately I had not accounted for the madness.

The gentleman concerned is a former Credit Manager and holds a qualification in the subject from an industry leading body, the ICM, of which he is a Fellow no less. (the youngest ever apparently – yikes, someone may identify him from this). The call lasted long enough for him to tell me this and also tell me that he knew what he was doing and with that the line went dead; most odd.

I checked the article again to ensure I had called the right person at the right company, which I had so having access to his last years accounts I thought I would see just how well he was performing.

The answer is, based upon 2009 accounts; with a turnover in the region of £1.5m and an outstanding debt of around £250k he is collecting his debt on average in 61 days. For me to judge this as a good performance or otherwise is not possible as I don’t know all the facts. I would like to think that if my terms were 30 days and I was not actually getting the money in until 61 days (Click here for DSO calculator) and someone called and claimed that they could solve the issues I had gone public with in The Sunday Times and as a bi-product put £75,000 cash in my bank account that I would show some interest an consider the possibility that there might be an alternative approach.

Interestingly there is a photograph of the poor chap published with the article that has the caption:

“Frustrated [Mr X] spends all his time chasing unpaid bills”

If you look closely at the picture, he is actually sitting on a washing machine drinking a cup of tea; the madness runs deep in this one!

Good old Albert Einstein pointed out that doing same thing over and over again and expecting different results is the definition of insanity. So to change the output a different approach is required. In the case above I’ve no idea if our process would improve the situation however based upon the evidence we have from other customers and the lack of washing machines in our office, I would say there is a good chance we would.

So, bad news Colin, you are not mad, if you were you’d certainly not be advertising it and you’d probably be running the show!

We are offering a free review of your Credit Control Process, if you would like to take advantage then register here and we will get in touch www.credit-control.co or call us on 0207 100 5978

Cash is king, if you had a pound for every time you had heard this old truism you probably wouldn’t be reading this!

The purpose of this article is to give an overview of a practical approach to assessing your current Credit Control processes, some ideas for reviewing and, if needed, enhancing existing process or designing new processes. Naturally I tend towards outsourcing however the approach will work for in-house delivery as well as outsourcing and also a hybrid of the two where an outsourcer is engaged alongside an internal team to provide cover for part of a ledger.

Most, if not all businesses leaders know that cash is the lifeblood of a healthy business, with commercial life being so demanding finding time to focus upon good process and procedures to collect cash effectively often gets overlooked. When the economy is booming, high order levels cover and compensate for  flaws in Credit Management process much like a puddle will cover the cracks in the pavement, however as the puddle dries, the cracks that can trip up a business appear, sometimes with disastrous results. Many good, profitable businesses have gone bust due to lack of cash.

Poor cash flow as a result of poor Credit Management and Credit Control Process is avoidable. With some time spent and an understanding of best practice, mixed with a dose of pragmatism, process can be improved to deliver dramatic, positive results. Where time is an issue, then engaging expert help to analyse, design and in some cases deliver a new process is becoming increasingly popular.

If your collections function is performing well, a review can still uncover areas for improvement. Reducing an already good DSO(Day Sales Outstanding, a measure of the average time it takes for a customer to pay your invoice),even by a seemingly small amount, can yield big benefits particularly for larger businesses.

However you decide to execute your final strategy, the following areas need to be addressed in any review and redesign.

• Approach and Scope of Review.
• Credit Policy
• Collection Process
• Collection Strategy
• Escalation and Debt Recovery
• Implementation of Change
• How to Outsource

Approach and Scope

Using a methodical approach is a must, start with a project definition. Examine the data available to help define the issues you wish to address and the scope of your review. Some issues faced by collections teams have their roots in the sales process; therefore sales involvement will probably be needed. Ensure that this initial phase includes mapping the stakeholders which will help when planning implementation.

The start point will always be some measurement and analysis of your current process performance. This is the result that your current process is producing and will act as a benchmark against which you will measure the effectiveness of any change to process. It may also help decide how far upstream you venture

The limits of your data will probably depend upon how sophisticated current policy and process is. With a simple process, such as the ruler and highlighter pen (taking the debtors list on a regular basis and highlighting the big numbers that are easy to collect) there will be little data available, generally the overall DSO vs. credit terms, the amount of bad debt and the bad debt write off.

At the other end of the scale there may be a clear credit policy against which you can measure adherence and more sophisticated processes in place enabling data to be collected upon different sections of the ledger, for example by customer turnover, invoice size, trading record or customer behavior to name a few. This will enable the definition phase to be more precise, homing in on specific areas that are critical to the effectiveness of the process and therefore to be considered for improvement.

Data relating to the regularity with which the task is performed should also be easy to collect. Consistent performance of credit control tasks is a characteristic of a high performing process.

You will be where you are, and if you are at the stage of no formalised or documented credit policy and Credit Control process, then that is the start point.

Based upon this analysis, the design of a new process can begin. Use data gathered regarding reasons for non payment to help with this. Map out the steps that will be taken and a timetable for the performance of the tasks, when and how often Credit Control will be carried out. Resource will also be a consideration at this point, look at internal resource available and alternate resourcing options such as the use of temps and of course outsourcing. If outsourcing is to be considered, it is a good idea to engage with potential suppliers early as they will be able to help with, and in some cases conduct much of the work for you.

Have a test phase built into the project to ensure the new policies and processes actually work in practice. Ensure that the process design address and, where possible removes barriers to payment within your credit terms. It is far less disruptive to try, fail and adjust on a small scale project and finalizing a process before communication and roll out. If this is done then the data from the test can be used as part of the change process to gain the buy-in of the stakeholders

The aims will vary with each situation; however the end result should encompass the following elements.

Credit Policy

This is a point for careful consideration. Credit Control must not become a sales prevention department, imposing a credit policy so strict that bad debt is reduced by virtue of doing no business. Conversely, a policy that is too loose will have sales romping away doing business with anyone and everyone regardless of their ability to pay.

For new customers, there should be a defined process for account opening, including some form of credit checking.  There are several online services that can provide data to help asses a customer’s creditworthiness. Based upon this, a credit limit should be set to minimise trading risk.  The account opening process should ensure that all required information is collected regarding new customers.  It’s amazing how often credit is provided without knowing what legal entity it is actually being provided to.

Once a customer is on-board, ongoing credit checks should take place at regular intervals dependant on the level of risk with the account.  You’ll probably wish to increase credit limits for regular clients with a proven history.  The health of your customers will vary with time, it is important that early warning signs are spotted to reduce the exposure to company failure.  Credit-checking services are now available which integrate seamlessly with your accounts system to provide a real-time risk-indicators relating to your customers and the level of credit provided to them.

Collection Strategy

Depending upon your start point, the strategy will focus upon areas of the ledger that need intervention to improve cash-flow.  You may need to categorise your customers to allow different collection processes to be used for example between key clients and those that order from you on an ad hoc basis.  Each collection strategy should be appropriate to the customer group and easily implemented and adhered to.

Once the collection processes have been defined for each group they should be used in a consistent manner.  Your customers will become accustomed to your collection process and will improve their payment habits in response.

Collection Process

The process map should be time bound from the payment due date and detail each task and the responsible person and business area. A flow diagram is a good way of publishing this as it is easy to detail the core process and dispute and query resolution loops.

The process used will be dependant on the category of customer and size of the invoice.  For example with larger invoice values you may carry out a courtesy call at a set point after the invoice is sent to ensure that there are no disputes and that it is on track for authorization.  Where possible the contacts should be personal in order to build a relationship with your customer at payment level.  It’s often the case that the Credit Control team has more contact with your customer than Sales so they can be important in improving customer relations.  Emails are useful to confirm points agreed on the phone and are may be used as part of an automated collection process for invoices of smaller value.  Letters can be used as part of the escalation process and often have a stronger effect than emails, for example as a Final Demand or warning that your customer may be passed to a Debt Recovery Agency.

At every stage, records need to be kept detailing content of conversation, and disputes or queries that have been addressed. This helps build a customer profile and history can be invaluable if a debt needs to be passed to Debt Recovery or to legal process.

Escalation

Despite your best efforts, some customers will still owe you money at the end of the Credit Control process. Documenting the consequences is important as it will ensure a consistent approach to delinquent payers. Done properly this will help educate and improve speed of payment where late payment is due to customer behavior.

It is important to bear in mind there are some customers that a business is better off without. Having a rules in place will force a case to be built for continuing to trade with a consistently delinquent customer

Debt Recovery

There are many debt recovery agencies and quality varies considerably.  Those offering the lowest rates (or ‘free service’ whereby the agency retains late payment fees from the debtor) may not end up being the most cost effective as they may operate a restricted process of letter and limited number of calls prior to escalation to legal process which tends to be expensive.  As with most things you get what you pay for.  An agency with a realistic rate may achieve a higher collection rate without the need for legal action, and importantly may provide you with intelligence based advice as to whether a debtor is worth pursuing with legal process.  Transparency is also important when dealing with a collection agency, ensure that reporting is clear and accurate and payments from your debtors will be passed over to your account promptly

Implementation of Change

Once your new policies and procedures are designed, tested and documented an implementation plan needs to be considered. Although important to implement and embed the changes, it need not be over complex. In short, to be successful it should ensure that all the people affected by and responsible for elements in the new process are clear about the reasons for change, the business benefits and their role and responsibilities with the new process.

If outsourcing is a feature of the new Credit Control provision then ensure that contracting is done with care. If the business is new to outsourcing then the following areas need to be included in consideration and selection of service providers.

Successful Outsourcing

The following steps will help keep you out of trouble.

• Clarity

Accuracy and detail on both sides will help ensure that both parties’ expectations are understood and met from outset. Ensure you describe very carefully the work you expect the outsourcer to perform on your behalf and agree who is responsible for each aspect of the process. Make sure the outsourcer understands and describes how their service meets your needs as they describe the operation of the service. Remember you are delegating responsibility, and risk, as you would to an employee. You will still ultimately be responsible for your business.

• Take a Reference

Speak to some current customers of your prospective partners and check any claims made by prospective outsourcing suppliers. One is a minimum, three is probably enough. Check for consistent stories and any common errors and try and verify any claims made by the potential suppliers.

• Transition Plan

Ask your potential partners to draw up a plan to move from your current situation to the outsourced situation. This need not be over complex, but does need to include relevant milestones

• Operational Plan

Document roles, responsibilities, planned communication. Where an activity is time bound, a clear process map detailing dependencies and deadlines needs, signed off by both parties.

• Contracting

Legal support from a firm with relevant experience is advisable.  Suppliers will generally use standard documentation. Ensure that this provides adequate remedies should the service fail significantly, inclusion of a dispute resolution procedure that enables service to continue for enough time to make alternate arrangements, where a serious failure occurs, can be useful. If you are including service measures ensure they are easily managed and don’t become an additional burdensome task. If you do target an improvement in DSO be realistic. What can be achieve will depend upon the start point, that is how generally delinquent you have allowed your customers to become. If your DSO is way out of kilter it may be possible to make some big improvements very quickly. Our own experience shows this to be the case with several clients, one in particular, a printing company, had not been communicating with customer at all. Invoices were issued and hope was the only strategy from there on. We halved this company’s aged debt within three months. Also consider past performance, look at the best figure achieved in the last four years if it is easy to do so, and give some thought to the level at which you will feel comfortable.

• Exit

Plan for exit before you enter into the agreement. Expect to pay a penalty if you wish to cancel for convenience and ensure that you and your chosen supplier are clear and committed to respective responsibilities on expiration or cancellation of the contract.

Outsourcing can be a very cost effective, flexible and scalable tool freeing up time, avoiding the need to increase headcount, leaving you more able to focus on growing your business.

In summing up, what ever you decide to do with Credit Management, ensure that it is reviewed regularly and that practice adheres to the new policies and processes and that these still match the needs of your business and current market conditions.

Done well your business will be more efficient, will have lower working capital requirements, reduced risk to losses due to company failures and you will have deeper knowledge of your customers, all of which are good for a healthy, profitable business.

Please call if you would like further details, I can be reached on 02071005978 or click email me to send a mail

Simon

I have just returned from Holiday, there is a mountain of mail, emails, voicemail and post holiday blues to contend with. If I could just get the world to stop for a couple of weeks whilst I take a break things would be so much better!

I am not expecting any sympathy, someone somewhere will have a bigger backlog than me. Additionally, as I am at the front end of the business, although sales slow whilst I am away, we don’t run the risk of our cash flow suffering or even drying up completely. Driving cash flow is, after all, our business.

From reports in the press, it would appear that this is not the universal picture.

The Institute of Credit Management have recently reported that businesses, in particular smaller ones, are experiencing more and more difficulty with cash flow, particularly over the summer months. I wonder if it is the absence of the “cat” is a contributory factor, or just that Credit Control is generally under resourced.

Consider this for a moment:

One would expect the Directors of a company to be managing the assets of their business very closely. Without wanting to generalise too much, Credit Control is very often performed by a single person, or several people who have the task as part of their role. Where there is a full time team, focus tends to be on the larger amounts that are easier to collect, initially, with some smaller invoices slipping the net. This sounds ok until you look at the value of the asset as a proportion of total net assets, managed by Credit Control; often as much as 40% of a business’ net asset is tied up in un-paid invoices.

The older a debt gets, the more difficult it is to collect. Maybe writing off the odd one or two is ok, but bear in mind, if your business is making a margin of 5% an additional £20,000 of sales will need to be made to cover the negative impact on the bottom line.

How many companies find themselves short of resource at some point in the year and notice an increase in DSO? Seasonal holidays, sickness and other un-planned absence can all take their toll on business efficiency, sometimes tipping a business over the edge allowing un-paid invoices to mount up.

Operating a Credit Management process consistently avoids this, so assuming there is a properly resourced process running (this can be judged most easily by Day Sales Outstanding CLICK HERE for a calculator) then all will be well until someone takes a holiday or goes off sick.

This may be accepted as a fact of business life however it need not be this way. It is easy to supplement or support your internal team with resource from out side; either a temp or a specialist service provider can help.

Using the old maxim “The best time to fix the roof is when the sun is shining” why not get a disaster recovery plan in place now so that you know exactly what course of action you will take if an emergency arises.

If you would like to talk it though with us, or have a free review of your current process then  give us a call on any credit management matters 0207 100 5978 or email by Clicking Here

Simon

Increased speed is often associated with an increase in risk. Speak to any road safety expert and they will tell you that “speed kills,” road signs urge us to “Kill our Speed not a Pedestrian.”  If Rubens Barrichello and Michael Schumacher had had their “squeeze” whilst pushing shopping trolleys around Tesco (or any other well known supermarket) rather than travelling at warp speed around a racetrack, no one would have batted an eyelid. The speed and the close proximity of the concrete wall made it potentially dangerous, so there we have it, conclusive proof that speed is dangerous.

Clearly Ghandi had never worked in Credit Management or considered a career as a racing driver. To take the same approach to collecting money as used for reducing road traffic accidents would be ill advised. When dealing with outstanding invoices time really is of the essence, the faster you collect your cash the lower the risk of debt becoming difficult or impossible to recover. Although Bankruptcies have slowed, there are still in the region of 4000 firms per quarter going into administration. Many insolvency specialists will tell you as the economy emerges from recession and people relax there is often a spike in the number of business failures. Where these failures are significant they can promulgate a domino effect, taking a string of businesses with them.

So what can be done?

There is a clear need for knowledge and speed. Here are a few steps that can be taken to lower the risk.

Have a company credit policy and apply it. Companies don’t just go bust over night; there are signs along the way that indicate a company is ailing. It is important, particularly where significant sums are outstanding, to keep your knowledge of your customer current using whatever means available. There are some good, cost effective tools to help, along with payment behaviour, press reports, and direct contact to get a feel for their current health. If you believe there is an increased risk, be prepared to take action before it is too late.  This doesn’t mean you have to stop trading, just be aware of the perceived increase in risk and try and find a way of mitigating it.

Collect outstanding invoices as fast as possible. Make sure your customers are aware of your credit terms and ensure they are in plain view on each invoice. Close communication, by telephone, with accounts payable as soon as practical is a good idea as it helps build a relationship which can mean you are paid faster than the next person on the list. If resource to do this is an issue, then at least call those customers where you feel there may be a risk developing.

Ensure that Credit Control is adequately resourced to carry out a higher level of work on a consistent basis. Where this needs additional help consider options for supporting the function, either more people or use of a flexible service to take some of the strain. Don’t wait until you get burnt to do this!

There are other measures that can be taken, feel free to down load our top tips from our website, they can be found by clicking: Top Tips for Better Credit Management

So why did Barrichello go right? He knows Schumacher as well as most of us know our parents, and yet he still put his car between him and a large chunk of concrete. Did he take his considerable knowledge into account before making the move? Did he decide it was better to risk being squished rather than Schumacher just spearing him at the corner? Who knows, but my guess is that he acted upon his available knowledge very quickly and took what he considered to be the lowest risk route.

Credit Managers have to do the same. The important thing is to consider the risk as far as possible and take what is considered to be the best decision rather than just letting events unfold. It won’t always be right, but at least you are able to consider responses to the possible outcomes having decided what to do.

Ghandi’s philosophy is great; take the time to enjoy your life: just don’t use the approach for Credit Management, or driving and F1 car if you are lucky enough ever to do so.

As August approaches my thoughts, other than thinking about family and business of course, turn to the up coming National Aerobatics Championships held annually at Connington Aerodrome near Peterborough. Last year, my 3^rd or 4th attempt at gaining recognition for my flying skill, I managed 6^th place in my class out of 19 competitors, a good position but not great. Building upon my learning from my recent golf outing, I have decided to enlist the help of a professional to see if I can turn a good performance into a great one.  From past competitions I know there is no one big thing that I can change to move myself up the ranking. It will take a combination of small improvements here and there that will add up to a little extra on each figure to increase my overall score, hopefully propelling me to the podium!

The parallel with our business lives couldn’t be more distinct.

I had a very interesting meeting with a turnaround consultant last week and this is just the approach they take to transform a struggling business, which is fundamentally good, into a thriving enterprise. The cumulative effect of attending to all the details that get overlooked as a company develops. A simple example is mobile phone contracts. You may start with a couple of phones and then as your company grows and you take on more employees, mobile devices are just ordered, without revisiting the contract and tariff to see if the best possible price is being obtained.

Taking a critical look at your business from the view-point of your original business idea can be illuminating. How much cost and effort is engaged on the core task and how much on other things that need doing to keep a business running and legal? Examples might be general book-keeping, payroll production and Credit Control. Unless you are an accounting firm, a payroll service provider or a Credit Management company, the chances are that these tasks, whilst important are non core. The less resource spent on these areas leave more for core tasks.

With the type of flying in which I engage, competition aerobatics, I could read a book and go and practise and improve over time. I only have 2 weeks so a review with an expert third-party will enable me to quickly home in on areas which could drive some small incremental change and improve my results.

The same is true of business, with time and effort, internal administration can be streamlined and fine tuned however sometimes an expert can get you to the end point faster.

We, as do many suppliers of services, will help with an initial process review for free which at worst confirms that your processes are high performing and delivering to potential, or will highlight some areas that might deliver some incremental change.

Combined small incremental changes can to help make your good business great.

For a free review of your Credit Control and Debt Recovery processes, give me a call on

0207 100 5978

Simon

We all know reliance upon hope is a poor strategy.

Last weekend I travelled many hundreds of miles to the Rolls of Monmouth, a beautiful golf course set in the grounds of the former home of Charles Stewart Rolls, co-founder of Rolls Royce, in the hope that I would not only win the Teacher’s Annual Golf Tournament, but come home having cracked the magical and elusive >100 point/54 hole score.

Having played one round in preparation about three weeks before hand, it was never going to happen. I knew this as:

a) Every one knows that to be good at golf you need to be lucky, and to get lucky you need to practice

and

b) It’s the same approach as I took last year and the year before and it didn’t work then either.

And yet I still had hope, that the same input would somehow miraculously produce a different result, despite strong evidence to suggest that it wasn’t going to lead to a happy outcome

The parallel to some organisations approach to collecting cash is surprising, in some cases frightening.

I meet many business people, some of them quite established and successful who have a very slick business machine; Marketing on song, leads flowing, great closure rates, good margins, successful delivery, quality product & service, only to get to the end of the process where the invoice is printed, dispatched and then nothing, except good old hope.

Hope to get paid.

Hope that it won’t take too long,

Hope that the customer won’t go bust before cash is collected etc.

Sometimes they barely know who has their money, quite often extending credit to customers as

“…they paid last time…”

with little or no credit checking and vetting. Even where this is done, it is normally done at outset and then never or sporadically refreshed.

Hope is relied upon, some pay and some don’t. Some are just playing the game and treating you as a cheap source of finance. Some are dishonest and have no intention of paying and some disorganised, the invoice languishing in the long grass waiting for some eager beaver to hunt it down and request payment.

The hunting often doesn’t begin until people start getting a little hot under the collar, a little outrage creeping in to over come the wonderful reserve and reticence that is sometimes experienced with when it comes to asking for money, despite in many cases it being payment for a job well done.

When the hunting does start, with a little steam escaping from the collar, it is generally not pleasant, the dynamic is all wrong from the outset. The payment is late, you want to shout and scream but customers are important. You hear words escaping that you just don’t want to say:

“…oh that’s ok…”

and

“…no problem, I understand…”

It’s either this or the other end of the scale, in which case you will not only jeopardise a quick payment but make it unlikely that you will see another order.

The good news is that this is all avoidable; all that is needed is a decent process.

There are two simple steps that can be taken that will impact the speed of payment.

Firstly, engage early. Call before the payment is due. In this way you are altering the dynamic of the customer contact. This is a service call to ensure all is ok with the invoice and that it is with the right people. Of course the opportunity of reminding people of terms and checking how payment will be made should not be missed.

Secondly, make the calls regularly and consistently. Customers will get used to the regular contact and discussion about invoices.  This takes a little time and discipline but it will yield results if you stick with it.

The need to operate consistently cannot be over stated. Focused resource works best which is why an increasing number of companies choose to use a service. Our service delivers the two steps above and more, generally delivering results after 6 – 8 weeks of operation.

You can reasonably expect a reduction in your aged debt of around 30% after 2 – 3 months.

If you would like your credit control to be more effective than my golf, then why not give us a call and we will give you a free assessment of your current process, procedures and results vs. an industry benchmark where available.

020 7100 5978

I do hope to hear from some of you!

Simon

Is this relevant to the world of Credit Control? There is a tenuous link I think:

Being a short day with time at a premium should help focus the mind on what really needs doing. Clearly not entirely true as I am sitting here typing this but it does also make me think of opportunities for  efficiency, things that could be improved to make a 3.00pm escape the norm rather than a snatched luxury. Recently there have been several afternoons I would have rather spent by the  river than in the office, which is where my connection comes in.

When collecting money, if you want to do it quickly without losing your customers, there is no substitute for a healthy relationship built over time. A relationship such as this cannot be built using email, too many of the senses are out of play to make it remotely possible. Face to face is best, but generally impractical so the next best thing is the telephone. So why is it, according to recent research, that most Credit Controllers spend on average 25% of their time  actually on the telephone, the work that produces the results?

Is this because they are lazy and work-shy as a profession? As with any profession it has it’s share of pro coffee drinkers who are on Starbucks Christmas card list but I think I can say with some degree of certainty “no” In our experience we find peoples efforts are frustrated by poor systems and process. Companies are willing to pay buckets of cash on marketing and CRM systems but when it comes to that final step of collecting the cash a long list and a highlighter pen is considered sufficient. Sometimes a rule is allowed!

Why does this situation develop and persist? Often because people are so busy working “in” the process.

Occasionally, if one takes a little time to sit back and think about what they are doing, how they are doing it and why they are doing it that way, ideas for improvements will start to form.

Evey now and again taking a bit of time out to think; get away from the office for few hours and think about the things that could be changed to make things work a little better.

Our clients are lucky, they can work right up to the wire tonight, safe in the knowledge that I am taking this terrible burden away from them.

Have a great weekend!

Simon