Being paid on time does not just rely on your customer – it needs to start within your own business
I am often asked “what is the biggest challenge your credit-management clients face?” More often than not, the answer to this question is: having effective query and dispute resolution.
We all know that cash is king, and the importance of ensuring debtors adhere to payments terms. However, what happens when the debtor upholds their end of the commercial relationship, but the business supplying the goods or services fails to do the same?
Business owners are primarily focused on sales and, in turn, profit, but what about the hidden costs that can lie within their own debtor book?
Business of all sizes suffer delays to cash collections because of a myriad of queries; these can be easily resolved, or more time consuming and involved to deal with.
Either way, every day that is delayed in solving those queries, is costing the business money.
In most cases, business owners may only realise their query resolution is inadequate when cashflow is adversely affected, or when a third party identifies the issues.
A double-edged sword
Ineffective query resolution is a double-edged sword; how this is dealt with impacts on the whole debtor experience, and can affect future buying preferences.
Why would a client want to deal with a company that cannot, or will not, rectify its mistakes?
So what is the answer? Be proactive.
And this needs to start at the point of sale. Are your terms and conditions supportive of your stance, when it comes to queries? If you only accept queries within seven days, then ensure they adhere to this: always be firm, but fair.
Are your sales team selling the goods or services as they should be? Are they using up-to-date and correct pricing, and liaising with operational colleagues?
Are internal systems used for order processing and invoicing up-to-date, and regularly checked? A collaborative internal approach is required to maximise sales and collections.
Get the invoicing process correct. Simple things to look out for are as follows:
- Is the correct company, or entity, being invoiced?
- Is a purchase-order number required?
- How are invoices to be delivered?
All of these affect the collectability of the invoice and, in turn, profitability. In a recent case, we saw hundreds of thousands of pounds held up for payment due to invoicing errors – this could have easily been avoided by putting a simple process in place.
No business can get it right 100% of the time, and so queries are inevitable. When a query comes in post-sale, deal with it, and quickly.
Attribute responsibility within the business and make people accountable, with clear escalation procedures in place, and, most of all, work as a team. After all, neither sales nor operations can function without each other.
This article was published in the April 2018 CCR Magazine on page 18. Please click here to view.
Sarah Radley – Managing Director
Inksmoor Finance Group Limited