We've made some updates to one of our most popular newsletter articles.
On a scale from 1-10 with 10 being “really excited” and 1 being “not
so much”, what ranking does your staff give the job of calling customers for money
fall…honestly?
During our conversations with dozens of
accounts receivable clerks and credit professionals, almost 89% would
rather avoid it if they could. Many tell us that they are busy with
current customers or trying to approve new applications and just don’t have enough hours in the day to follow
up on the slow payers.
As a business owner, I
understand the need to service your current customers. What many owners
fail to consider is the actual cost of allowing customers to use you as
their banker. Let me explain. If you have $500,000.00 in receivables and
your Line of Credit cost 4.00%, you must pay $1,666.67 per month in
interest costs. There are many other costs such as breached bank covenants, service fees, missed opportunities
to put your money back to work, inability to order more raw material, and interest costs to your suppliers.
To counter this
drain on your profitability and increase your cash flow, we recommend developing a set of daily,
weekly, monthly, and quarterly key performance indicators that your
credit and accounts receivable staff can follow. If this checklist
system is developed and followed consistently, the return on your
investment will be immediate.
Further, if you're having a lot of trouble maintaining a skilled workforce in your credit department, or would like to learn how set up your KPI checklist, please visit our consulting division at https://www.creditprocessadvisors.com/freeconsultation.php for a confidential consultation.
Credit Process Advisors provides strategic credit management services throughout the Order-To-Cash cycle.
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