MARY-LOU DUGGAN, from Pierce Chartered Accountants, tells a modern-day story about credit control
ONCE upon a time there was a businessman who worked very hard indeed. His family rarely saw him and when they did eventually see him, he was distracted, tired and depressed.
His wife asked him: "What are you doing this for?" His answer was: "Our future, our security".
"What about now?" she replied. "How far away is the future?"
Good Credit control can help answer this question.
PRINCIPLES
Indignity: when your customer becomes an overdue debtor.
Ultimate indignity: when your customer doesn't pay you at all!
Many businesses large and small suffer indignity at the hands of their customers and some suffer the ultimate indignity of not getting paid at all.
And the reason why? Priorities. After running round and proverbially working all the hours that God sends, facing the prospect of chasing customers for money becomes a low priority. Or perhaps you just don't want to face the fact that you are suffering indignity at the hands of your customer base.
However, there comes a time when YOU MUST if bad credit control principles are not to blow your dreams away or put the future out of reach.
Having...
worked so hard to build a customer base
smiled in the face of adversity
suffered sleepless nights
acknowledged that the customer is always right
accepted demands for service
perhaps travelled far and wide
sometimes even had to tolerate extreme irritability with customers shouting, and
paid out wages, taxes, and overheads in providing a product or service...
...you deserved to be paid.
THE BRICKS AND MORTAR
From sole traders to giant corporations, nearly all have borrowed money against assets. Think about it. For the majority of independent business people, the equity in the family home has been involved in borrowing at some time. For the majority of corporations, borrowing is secured, in part against assets.
So you have an overdraft. How much is it? And how does it compare to your debtor book?
Ask yourself: Are you an unlicensed money-lender? Are your customers borrowing your borrowing? And are others funding their businesses or lifestyles using your property? How many bricks in your wall are propping up your customers lifestyles or businesses?
CHASING SPECTRES
You may or may not believe in ghosts, but the modern business person is nevertheless haunted. Spectres lurk in the most devious and unexpected places - under the pillow, in the car, in the shower etc, and from the list of many the top 10 are:
1Filling orders
2Finding new customers
3Trade creditors
4The bank manager
5Wages
6Overheads
7The tax man
8Finding enough family time
9The weather
10Trade debtors
Why is No.10 trade debtors? The answer is simple. It's partly the need for dignity as explained above, and if you think about it, its also the only item on our list, including the weather that doesn't nag at you.
If left alone, your debtors will not nag, they will not argue, some of them will pay. Many of them won't.
EXORCISE THE SPECTRES
Move trade debtors from No.10 on the list to No.1 on the list and watch your debtor book exorcise the ghosts in the rest of your life.
Managed well, you will reduce your borrowings, ease your cash flow and keep all of your good customers.
COLLECTING MONEY BRINGS MORE BUSINESS
If you owe money to a supplier, are you more or less likely to place another order? Yes, you are right. You are less likely to place an order if you are embarrassed by a debt.
Therefore, if you encourage your customers to clear their debts, they will logically be more likely to place another order.
THE HEALTH CHECK AND THE ANSWER
In order to reorganise your business priorities, you will need help. We can tailor systems to suit your business, and can simply and easily teach you or your staff to cope with this new philosophy through simple systems, determination, training and a sense of humour!
We can make you smile in the face of adversity, chase your spectres away and help to save another brick in your wall.
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