Ladies, we ALL know that in order to do absolutely ANYTHING effectively in your life,
there are steps you must take to do so. Can you drink a glass of water,
if you have not filled the glass with water? Can you start your car if
you have not put the key in the ignition? Would you begin putting your
pants on, by first zipping your zipper ? Would you begin watering your
garden before you planted the seeds? These questions are of course very
simple and common sense oriented. However, so is the cash flow process.
Without policy, a written scheduled directive of the flow process for
an internal receivables staff to execute, how can you possibly believe
that your business will succeed?



Lets use accounting terminology to bring this point home...Would you
send a final demand notice to a client whose invoice is not even due
yet? Would you extend a credit line of $50,000 to a company who had
dissolved 4 prior business ventures in the past 3 years and simply
changed their company name to escape past creditors? If on your aging
report you see a client who had a balance due in each bucket from
current to 180 days , would you approve credit again on their next
order? If a client called you and said YOU ARE NOT MY PRIORITY , I have
other vendors that need the money I owe them more then you do, would
you continue to act as their bank, just to say you have them as a
customer?



Now for you these scenarios may seem silly. However in my line of
business, they are facts. I have clients that before they came to me,
there was no policy. I have clients that had taking the time to create
a policy and send out a memo re the policy, but it was never executed
or acted upon. I have clients that had created, and implemented and
trained their staff, however it was never enforced. Each individual
employee made exceptions to the rules...then I received phone calls
from potential clients in desperate immediate need. From an extremely
HIGH DSO, to hundreds of thousands of dollars collecting dust, rather
then cash flow, sitting in their aging buckets, to clients with a
desperate need to find their customers that were giving credit without
any prior check up and suddenly they had disappeared. Sound familiar?



CREATE, DOCUMENT, DELEGATE, EXECUTE, ENFORCE, & MEASURE POLICY.



O.K. Now it is time to sit down and CREATE your cash flow
policy. Consider all aspects along the flow process. From potential
client screening, to data entry and follow through of credit
applications, to the documents that should be included in your credit
screening package ( ensure signatures are requested on all documents),
to the criteria schedule of credit terms and conditions extended, "new
client tracking ", annual current client "check ups", a strict schedule
of the collections process, 1 courtesy call prior to due date, 2 calls
post date, 2 late notices, 1 final demand and then submission to a
third party agency.Also always ensure there is ONLY 1 employee with the
authorization capability to extend payments arrangements and lift
suspension of credit without payment. If everyone has the authority to
make exceptions to YOUR policy, why are you creating it?



Now, Document your policy in writing for your accounting
staff , sales staff, and customer service staff to review. You may say
why would Sales or Customer Service need to review and understand MY
receivables Policy. Ill tell you why. When a salesperson is to the
point where they are getting ready to close a sale, their heart is
beating, their blood pressure is high, they are excited...they are
going for THE CLOSE. Do you think that a credit application being
incomplete is going to stop them from making that sale? Do you think
that a Customer Service Rep who has been appeasing a client for 20
minutes into her lunch break is going to continue and try to gather all
of the facts regarding the dispute, or are they going to tell the
customer they will issue a credit so she can run to the break room and
get the latest "water cooler" gossip? Can you walk properly if only one
leg moves? Can you pick up something if only 2 fingers bend for grasp?
Everyone involved directly, and Indirectly should know what the policy
consists of. From credit applicant screening, to criteria for credit
terms and conditions, which documents are in need of signature and once
you extend credit, who will be watching the new client for the first
year, to ensure habits don't change. Every single step should be
outlined as a directive in writing , and each person within your
organization should know their part. This is important when writing
your policy, ensure you DELEGATE responsibility for each item
to a department head or specific title within your organization. using
individual names if non productive, you don't want to have to change
the document each time an employee comes or leaves. However using a
title or department head shows who is responsible for each directive
and they will be the ones to hold accountability. The salesperson
should know they can NOT close that sale until that credit application
is approved. The Customer Service Rep should know she can NOT offer a
credit without all of the facts. Your collections team should know that
after 3 phone calls, 2 voice messages, 2 late notices and a final
demand letter 2 weeks ago,the account is immediately placed into
collections BEFORE it rolls into the 90 day bucket. (these are just
examples of collection schedules).



You have created your policy, you have documented it, you have delegated the procedures and responsibilities. Now it is time for execution.
Do not think that simply because YOU understand the process and
procedures within your policy, that your employees do as well. I am not
saying that they are not as intelligent, nor am I saying that you do
not know how to write effective policy, what I am saying is that
EVERYONE should understand clearly, so to have as little trial and
error proceeding forward. So, meet , speak, answer questions, explain,
reiterate. ENSURE that each department , each manager, each employee
knows their responsibility and that of the other departments. If a
client calls and wants to place an order, does the customer service rep
know who to contact for a credit application? If a sales person
receives a call and their client requests an extension of credit terms,
who should they contact? All of this is menial yet crucial!



You can breathe now. believe it or not, the tough part is over. Now,
with enforcement, this should be easy as long as you made your policy
clear and concise with limited flexibility available. There will be
trial and error, it is new and different. Not only internally but with
your clients as well. No one is happy about change, until they see the
benefits from that change."Through Change, Comes Growth". Take
complaints, ridicule and whining in great stride. In the end, your cash
flow will improve, your bonus will increase and your businesses
reputation will by far be complemented.



Last but certainly not least is the CONSISTENT MEASURING OF THE POLICY
. Do not be mislead when I said the hard part was over. There is ALWAYS
room for improvement.On a monthly basis , you should review your
financial reports. On a monthly basis assigned employees should monitor
and measure the new clients who have been extended credit and ensure
there are no red flag signals emerging. If there are , there should be
IMMEDIATE measures taking to prevent loss. Annually, all clients, both
new, current,. and even long term customers should receive a financial
"check up". Not many thought that Boscov's or KB Toys would file for
Bankruptcy. One year EVERY salesperson on earth wanted to meet with
their VP of Purchasing, the next year, they were in the process of
dissolution. Do you think a salesperson today would want to meet with
them> Of course not, there is no need, because the company filed BK.
So the point is , YOU never know, but you can secure the amount of loss
through regular check ups and research.



Each month, following your newly expedited policy, there should be
improved on your receivables. Each quarter there should be
imp[rovement. Now when you get to a point that there is no improvement,
dont stop there. Revisit your policy and see what tweeks you can add to
bring ongoing improvement.



Until the next article, I wish you continued success and Increased Cash Flow!





Jennifer Stacey

Director of New Client Portfolio Development

ABNA International

Direct: 302 883 8564

E Connect: jstacey@abna.us

site: www.abna.us