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Print ArticleTHE COLLECTIONS PLAYBOOK
I would like to urge you to put everything you know, along with everything you practice, together into a Collections Playbook of sorts. This will make you think about the many layered elements of extending credit until you eventually develop something like a formal credit management philosophy.
Be tough on yourself — ask the right questions:
• What are the industry's general policies when it comes
to credit? Do they work?
• What have you done that's worked well? What practices do you follow that seem
restrictive or inefficient?
• How is your credit/accounting team viewed by the company and your customers? Is that
reputation fair and good?
• Has your credit policy been profitable? Do you monitor your investment in your customers?
• What concessions do you make that are required in order for your firm to remain competitive?
• Do you establish collection targets for your receivables specialists and tie their
achievement to bonus pay?
GET REAL — THE BOSS CAN STINK AT COLLECTIONS
As early as 1300 B.C., the Babylonians were lending and selling on the basis of charging off against some form of security or collateral. You can bet that, even then, some Babylonian boss wasn't following the rules he had set himself. Bosses are good at rule breaking. I dislike collections — calling for money, sending those "pay up now" letters. I'm not alone. Many owners are so rooted in business development, romancing customers and expanding their company's reach, that chasing payments — which can turn into an antagonistic and aggressive exchange — runs completely against their nature. In fact, owners can really get in their own way when it comes to credit decisions, collection strategies and the cutting off of a harmful customer.
Sure, the boss loves the feeling of depositing a hard-won check and clearing a delinquent balance, but calling accounts, nagging them and recording an endless loop of their excuses can make anybody feel like one of those guys who cut the impossibly long grass meridian on interstate highways — it's a thankless job that never ends. Freshly trimmed grass quickly turns wild and weedy just as fresh sales on an aged receivables report, once nestled so peacefully in the swaddling cocoon of the current column, begin their death-march to the far right columns of your green bar paper . . . aging, aging, aging. It can become a dangerous mess quickly.
