Collecting from customers is the ultimate frustration for most business owners. Often times, however, it does not have to be as difficult and aggravating as it is. Most companies suffer from simple disorganization in their credit and collections management. Between not knowing who exactly their customers are that they are collecting from or not knowing when their customers are due, this leads to longer collection times. If you want to learn how to collect faster you will need to do an overhaul of your current credit and collections management processes.
To truly fix your credit and collections management problems, you have to start from the very bottom. Analyzing who exactly your business is may seem silly, but it has a great impact on what tactics you should take when collecting.
WHO ARE YOU?
Most business start out with one clear, straight forward goal in mind, but as they start to grow they also change. Take the time to redefine who exactly your business is with what products you focus on and who your target market is.
B2B OR B2C?
This is a really important question that greatly impacts your credit and collections management. In a B2C setting, where you are serving individuals rather than business or organizations, you often are paid at the exchange of the good. There isn’t much invoicing going on. In a B2B situation, sometimes you can get lost in the crowd. Businesses are paying off many invoices at one time and you will need to stand out to make sure you’re in the front of the line.
Defining your industry and specifically as possible is extremely helpful in credit and collections management. First of all, each industry has their average net days. If you’re in the law firm industry trying to compare yourself to a manufacturing industries typically days sales outstanding, you’re going to have problems. Secondly, each industry is unique in collections. The construction industry will sometimes have to deal with mechanics liens and the transportation industry will need to deal with freight bills. Determining what industry you’re in can help you set a goal and know what to expect.
Are you serving small businesses or large corporations? There are many different tactics you need to take based on what kind of customer you are serving. If your invoices are mostly small items but in large quantities, it may be best to focus on those outstanding the longest. But if a large corporation has a large bill outstanding, there may be a different approach you should take
Who exactly are you serving and what industries are they in? Every industry expects and needs their invoices to be laid out differently, such as in government or non-profits. Knowing the right way to present your invoices to the customer greatly impacts the speed in which you get paid.
Once you have researched these areas of your business thoroughly and have specific details for each one, you can start to address these areas to improve credit and collections management.