Over the 29 years
I’ve spent in the accounts receivable management industry, the vast majority of
reasons a creditor experiences a slow-paying customer boils down to one of
three issues: They are:
1. Sticker Shock/Dispute
Take for example an I.T. company that is contracted to install a new
software application. Only after the installation does the software company
realize that the customers network is not configured correctly, requiring the
customer to either abandon the purchase or upgrade some hardware. Either
decision will cost the customer money they hadn’t expected. The same scenario
plays out all over North America each day and affects every industry. Therefore
it is absolutely vital that creditors work very hard to manage expectations
early in the relationship.
2. Invoice Inconsistencies
Many large customers are now automating their accounts payable systems
to save themselves money through the outsourcing of this back office function.
These automated systems are all different requiring suppliers to become subject
matter experts on their customer’s payable systems! If your invoice isn’t coded
correctly or doesn’t contain certain signatures or purchase order numbers, the
customer doesn’t call you to ask for help. They simply leave you to figure that
out for yourself. This process causes payment delays to your invoice. And once
your invoice is received correctly then the customer takes another 30 days to
pay.
3. Simple Pressure Required
The third involves a customer who is initially delaying paying your
invoice due to a cash flow problem. This customer knows that trade credit is
much easier to get than bank credit, so he uses his suppliers as his bank.
Often a polite but firm telephone call is all that is required to receive your
payment; however this customer’s financial situation may be more precarious
than even he anticipates. In this case the creditor who acts first – gets paid
and those who wait – don’t.
More and more
companies are embracing the idea of outsourcing their credit and accounts
receivable management functions rather than maintaining staff, lease space,
technology, and training on their own. Should you consider outsourcing your
credit and accounts receivable functions – it is vital that your provider
clearly understands the above-noted concepts and can skillfully navigate their
way to obtaining payment and serving your customer or help you to quickly
identify a problem customer and guide you to consider the appropriate actions
before it is too late.
About The Author: Brad Lohner is a 29 year
veteran in the accounts receivable management industry in North America. He
owns Credit Process Advisors, a credit and collections consulting company, as
well as two commercial debt collection agencies in the USA and Canada, along with
Lien-Pro® Canada’s only construction lien filing firm.
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