Gift Rep Sandy

Posts Tagged ‘cash flow planning’

Guidelines when Making ‘Collections’

1.  In general, give buyers the “benefit of the doubt”.  Seldom do store owners purposely ordered products with the intent of never paying.  Although lack of payment may look suspicious, an outsider does not see when emergencies come up, sales drop unexpectedly, special community events flop, or when health issues may interfere with normal payment schedules. Most of the time buyers are honest when you treat them with respect and willingness to find a solution. I find that approaching collections with a friendly, open mind helps greatly in getting payments quicker. Some people lie of course, but those are the exception. Retail IS a tough business, and if you empathize, you will get more cooperation with payments.

2.  Don’t let an invoice remain overdue for more than two weeks before contacting the buyer in some fashion.  Statistically, the longer you wait to begin collection efforts, the greater the odds that an account becomes completely uncollectible. Also, by letting the account slide, a perception is created in the mind of the retailers. They begin to rationalize the late payment, thinking maybe you don’t really care about – or need – the funds. Last, but not least, a person who is late finds it awkward to re-order, which depresses your sales AND their sales, creating a domino effect where it becomes even harder for them to repay. ONE PHONE CALL TWO WEEKS AFTER INVOICE IS DUE WILL RESULT IN PAYMENT WITHIN ONE WEEK for probably 75% OF CUSTOMERS. Start a tickler file and call weekly with a friendly call reminder. Squeaky wheels get paid first.

3.  Frequently, a late or non-payment is due to a problem or issue that can be easily resolved, such as:
•    Invoice lost or never received
•    Damaged or missing items
•    Billing questions, or
•    Important information missing from the shipment or invoice.

A quick, friendly call to the buyer often resolves these issues and expedites payments a large majority of the time. Some store personalities are well meaning, but tend to lose every invoice – just understand that keeping this customer means you may need to re-fax an invoice every month, and make reminder phone calls.

When it becomes necessary to make collections efforts, I suggest the following:

•    Send regular statements or duplicate invoices when payment is 5 days late. Include a note on all invoices (including the original), specifying a % of finance charges “may” be added to late payments. Sometimes this will prompt payment with no further action. For chronic late payers, add the service charge on statements and “late” invoices. Some buyers will not pay the finance charge, but it seems to get the check in the mail faster.
•    If you don’t receive a response within two weeks of sending a new invoice or statement, call the store. Talk FIRST with the buyer as they are often the person responsible for making sure the paperwork gets through channels for paying the bills, or actually pays the bills.  In the cases where there is a separate bookkeeper, talking to the buyer first aids your collection efforts because buyers don’t want buying privileges suspended or interrupted because of a late payment (and bookkeepers don’t always communicate well with the buyers).  If neither the buyer nor bookkeeper is available, ask to talk with the store manager or owner (if different from the buyer).  NEVER leave a message concerning collections with an employee who just happened to answer the phone when you called! This upsets the store owner/manager, and may or may not result in payment (and often they don’t get your message anyway!), but definitely burns the bridge for future orders. Of course, if they are screening calls, and not answering the phone, do not be shy about leaving a direct message.
•    ONCE A PAYMENT IS 30 DAYS PAST DUE (60 days past invoice date) on orders I have generate, PLEASE email or fax me a copy of the original invoice (and current statement if applicable) with a request for assistance. The next time I call them or am in their store, I will have the necessary information to collect for you. HOWEVER, AS SOON AS YOU GET PAYMENT contact me again, so I am not needling your customer unnecessarily. Please don’t forget this critical communication.
•    Continue to contact the customer throughout this process — the old saying “a squeaky wheel gets the oil” is very true.  Consistently calling every week or two will bring results, especially when your company and my company are both working together to secure payment.
•    In a case where none of the above methods work, it would be time to engage more aggressive actions:  First, suspend any further credit privileges for this customers (if you have not already) and email me a list of the collection efforts you have made up to that point.  Continue to remain friendly with the customer (even though you may feel like wringing their neck!) On the other hand, I can talk to them about the seriousness of their lack of payment. (You are the “good cop”, I can be the “bad cop” without damaging your business’s relationship with the customer).  Often times, when I remind buyers legal action may be pursued on this matter, payment goes into the mail.
•    If none of the above actions result in payment, it’s time to turn this account over to a collection agency or file in small claims court.

In my years in business, only a few cases where truly aggressive action was necessary. Most of the time, arrangements for payment can be made early in the collection process. The sooner you start calling them, the sooner you will get paid.

An important part of maintaining cash flow is to assist your vendors with collecting payments from late paying account.  Although collections are usual not considered a sales rep duty, I chose to provide this service for the following reasons:

1.    To expedite my own commission payments (and cash flow)
2.    To stay informed about stores who were late payers.  If a store pays one supplier late, most likely they will pay other suppliers late.
3.    To negotiate payment terms on future orders from this store.
4.    To keep track of payment patterns.  Habitually and seriously late payers may not be good stores to continue servicing.

Aiding in collection efforts also aiding in maintaining good relations with your vendors.  Many of my vendors appreciated the extra efforts I took to protect them against dishonest or trouble accounts.

Numerous times over the years, I collected payments for my vendors from stores with payment problems.  One time, I received calls from several of my vendors asking about non-payment from one of my stores.  When I called the store to inquire, the buyer seemed surprised and told me she needed to do some checking.  As it turned out, the new stock girl they hired for the season did a thorough job of inventorying the products on the shelf – but threw away the packing slips, invoices and paperwork with the empty shipping boxes.  Once I received this information, I asked all the unpaid vendors to fax the invoices to the buyer and payment checks went out quickly.

The saying “Time is money” is especially true for sales reps!  Anywhere you can save time in one aspect of your business leaves more time to make sales.  Listed here are a few of tips to help you save time and money in your business:

1.    Stay with family and friends whenever and wherever possible.  Motel costs can add up in a hurry.  Staying with family or friends saves you money, and also gives you a local contact person to help with directions, store referrals and familiarity with your territory.

2.    When possible, pack quick snacks to eat on the road.  Packing snack foods such as trail mix, granola bars, nuts or jerky are a good source of energy food when you don’t have time to stop for lunch.  (Ever gotten that last minute phone call rescheduling an appointment right during your lunch time?)  Packing a cooler with a good supply of water or your favorite canned beverage is also a good money and time saving trick.

3.    Prepack your suitcase with a complete set of products you use daily. Include a pre-packed set of make-up and toiletries, refillable shampoo or lotion bottles, vitamins, pain killer and any products you use on a daily or weekly basis.

4.    Keep maps of your territory in your vehicle.  Packing a general state or region map along with detail maps of the larger metropolitan area are can save a time when trying to locate potential buyers.  I found using maps is MUCH MORE effective then asking a local resident for directions who can ultimately give you bad directions and tell you, “You can’t miss it!”

5.    Keep a detailed customer and vendor contact list handy.  If you use Microsoft Access for your database, you can easily sort and print out lists by sales route.  Using printed lists with complete contact information saves time and aids your memory when contacting or visiting your customers.  No more embarrassing moments trying to remember the buyer’s name!

You will learn plenty more time saving tricks along the way as your continue to work your business.

Building a Livable Income.  As a rule of thumb, it takes 2 – 3 years to build and refine a customer base and vendor products lines needed to sustain a livable income.  Following is an outline of income potentials to expect in the early years:

•    The first 6 months to a year will be a major cash drain as you will be spending money on travel and tools to generate potential buyers and orders, but may not be receiving enough commission payments to meet those costs.

•    The second 6 months to a year will give you enough income to meet most of your business expenses.  If you have done well, you will break even somewhere during this time frame.

•    Sometime during your second year, you can expect to generate enough orders to pay your business expenses and make a ‘bare-bones’ living.

•    If you have worked consistenantly and persistently over the first two to two and a half years, you should be able to sustain a fairly good group of loyal buyers and producers to provide a sustainable income for your efforts.

One major advantage of sales repping over other start up businesses is the low start up and overhead costs associated with this type of business.  Whereas, most new businesses require a large cash investment for products, office and equipment, sales repping requires only a car, business card and your dedication to working the business!  But as with any start-up business, planning for the ups and downs of cash flow will make or break your business.