If someone asked you what the most important thing about selling was for your business, how would you answer?
Those are good answers and there are probably many more.
But, the right answer is collecting the money you’re owed.
There are two essential parts of the credit sale process:
Of these, delivery and acceptance are the most critical.
Suppose you manufacture hats and you get an order for 100 dozen red hats. You make the hats and to your eyes they look red. The hats are packaged and shipped. OK we have the delivery piece in motion.
Suppose that somehow shipping labels were confused and the hats that were delivered were blue. Will the customer want and take the blue hats? Maybe, maybe not. If they’re not taken, there’s no acceptance. So now we have delivery but no acceptance. And we may not be able to move into the billing and collection part of the process.
But let’s presume the red hats were delivered and the customer accepted them.
Now we can move on to billing and collection.
What is your billing procedure, what are your terms if any, and most important what are your policies and procedures for policing your credit sales? Do you have policies and procedures for collecting your money? Many businesses don’t or if they do the policies and procedures are not enforced or enforced halfheartedly.
Customers will do what you let them get away with. Let’s say your terms are net 30 days. If your customers know that to you net 30 means give it a few more days to see what happens, many of them will take that extra few days. Guess who gets hurt?
Several years ago I wrote an article titled “We’re Selling More than Ever but We’re Broke”. That article talked a lot about credit and collections policies and procedures.
Every business at some point has to decide whether growth is the main objective or profit is the main objective. The faster a company grows the more likely it is that credit and collections policies and procedures will become lax.
It’s your money. Make sure you are doing everything you can to make your Accounts Receivable good accounts not no accounts.