Declan Flood, aka The Credit Coach, on credit control and the importance of collecting all the money you are owed in full and on time.
The reality is that you need a simple collection process in your business to make this happen. If you have followed the advice given on Credit Terms in the last edition, that is a great starting point. Now you and your customers know exactly when payment should be made, so the next stage is to make sure that happens.
The first requirement is that you have at least one person in your business that is responsible for the collection of monies due. Making statements like ‘everyone is responsible’ will mean that no one is responsible! Of course, I would say they should be trained and professional, but the most important thing here is that they enjoy the job of collecting and are allowed sufficient time to follow up and make the calls. This is where most hardware businesses fall down. You should have a few weekly and monthly reports that are reviewed by senior management, with a view to supporting the credit controller and providing the required resources.
There are a million reports that could be generated, my style is to keep it simple, so a measure like – how much extra should be in my bank account, if all customers were paying to terms – is a great place to start; I have a simple spreadsheet that will calculate this number for you and I am happy to send it to you, simply email me on email@example.com with the words ‘How much extra should be in my bank account?’ and I’ll attach it and send it back to you. This is a great way to monitor progress over time. It will also help you to set cash collection targets, which really should be done every month.
Declan Flood: “You should have a few weekly and monthly reports that are reviewed by senior management”
This Business Support article featured in the May/June 2016 edition of The Hardware Journal.