Your Enemy; Complacency
We were honored last month to have been provided with the opportunity to conduct a presentation at the Credit Union Lenders Association AGM. The purpose of our presentation was to provide the attendees (commercial lenders) with some insight as to how they can better assist their small business commercial clients in the area of accounts receivable management, thereby leading to improved cash flow and day to day liquidity.
In preparing the presentation a common theme emerged that we thought was critical enough to bring to the attention of all of our clientele. Following are some quick bullet points from our presentation. Should you be interested in obtaining a copy of the full presentation slide deck in .pptx format please do not hesitate to contact us via email. Just note: “CULA slide deck” in the subject line of your email to: email@example.com
Primary cause of the dreaded “cash crunch” for small business:
1. Contented to a fault; self-satisfied and unconcerned
2. Eager to please.
The key issues we see that increase the probability of non-payment.
COMPLACENCY: Time of Sale
-Obtain a signed quote, work authorization or purchase order.
-Obtain complete customer billing and contact information.
-Communicate terms of payment.
-Determine if the dollar value of the business relationship warrants a credit application.
COMPLACENCY: Time of Billing
-Failure to bill immediately upon completion or delivery results in the loss of urgency to pay on the part of the customer.
-If it’s not a priority to invoice your customer how can you expect it to be a priority for your customer to pay?
COMPLACENCY: Follow-Up on Receivables
-Delinquent accounts permitted to age will wreak havoc on company cash flow.
-Probability of payment diminishes to 50% within 180 days.
-Prolonging the decision to invest resources into an effective recovery campaign on aging accounts will inevitably cost the organization more.
Make a plan and expect to follow-up: take on the responsibility yourself, make it a staff responsibility and priority or, outsource to a third party partner (attorney/agency).
From widely regarded as of the greatest NBA coaches of all time Pat Riley:
“When a great team loses through complacency, it will constantly search for new and more intricate explanations to explain away defeat.”