Fight back with the right mind-set:
• Fight without ego: If you have a tendency to procrastinate or weaken when collecting, then check your head. You just may have the wrong business blood type for this job. Rely instead on an ace collections specialist on staff who treats the company's money like it was her own. There are actually people out there who love the solitary nature of receivables work and the delinquent dollar chase. If you don't have one, find one and incentivize the hell out of her.
• Fight with momentum: Have you noticed that ownership of receivables goes through an evil transformation with the passage of time? The money on a customer's account, which began as wholly yours, mysteriously turns into your customer's money — changing the entire dynamic of your relationship and putting you into the vulnerable position of begging for the return of your own cash. Speed is everything when it comes to successful collection of a debt. The American Collectors Association studies the numbers like no other; they declare the probability of recovering a past due debt diminishes at a rate of approximately 1 percent every three days, or about 10 percent every month. Attack your money while it still has your scent on it.
• Fight with brutal honesty: A real customer is someone with both the means and the motivation to pay you. They have to have the necessary cash at their disposal along with the full desire to give that money to you. There are few things more frustrating than negotiating to get your own money from a customer who just happens to be flush with cash but still determined not to let you have any of it. Be brutally honest with yourself and the account holding out on you. If an account is missing either of the two ingredients necessary to transact business (the means and the motivation to pay), then they are not a customer. At best they are an unprofitable source of heartache; at worst they are an imminent bad debt and you owe them nothing more than your determination to retrieve your mistakenly invested cash.
THE FUNCTION OF CREDIT — A FINAL WORD
In summary, I present you with a business rarity — a truism upon which you can depend. For every economic period, for any stage your business might be in, for every big or not-so-big business, for any industry on the planet, the objective of credit is to lend with the purpose of increasing profits and sales. Are you achieving that goal with your credit policies? A sound credit policy in business is the blueprint to management by measurement. Do you understand the level of financial exposure that your business can endure? Do you know the amount of working capital you'd be willing to risk? Put another way, how much are you willing to "invest" in your customers, particularly in a time of economic uncertainty, to increase your profits and sales? Credit management starts before the sale and does not stop until the full and final payment has been received.
About the author: Chris Traynor, SPHR, is the director for Whip-Smart Management Consulting, Wayne, N.J., and senior business columnist for Surface Fabrication magazine. He has 25 years of experience in the solid surface industry as a consultant to fabricators, distributors and manufacturers, and can be reached at email@example.com.