The biggest change we’ve made is becoming more careful about customer background checks. We pull credit reports on all new accounts, of course, and we’ve extended that to include accounts that were previously set up in our history but have not done business with us in a while. We do not assume that those companies’ past history necessarily reflects their current situation. For instance, if a company has not done business with us in the last six months, we run them through a quick check before we accept their credit. In 95 percent of the cases, everything is fine and we do business as we normally would. But in some cases, there has been an ownership change or the company is facing some issues that have cropped up recently.
We feel it’s safer to be proactive. If they haven’t done any business with us in six months, was it because they just didn’t need our service? Or is it because they went somewhere else and got rejected? We’re trying to avoid getting in any jams; just because they had an account previously doesn’t mean that it’s still a good account. We want to make sure they can pay us before we do anything.
Basically, we’re trying not to ignore any warning flags these days. The challenging part is getting our salespeople not to ignore them. Sometimes, in pursuit of a commission, they’ll overlook potential problems with a client. And we realize that just because a company has a smaller inventory doesn’t mean they’re in trouble-things that used to be telltale signs are just good business these days. But that’s why we do the credit check. We don’t want to expose ourselves to any unknowns.
Rentals and Service
Another way we’ve gotten stricter is by enforcing tighter controls on past due accounts. We now start collection calls at 30 days rather than 45 or 60. That first call is a very friendly call just to find out when to expect payment, and we find that most people are willing to work with us. What we’ve found is that a lot of customers will pay whoever calls them. They have every intention of paying everybody eventually, but they are stretching their cash flow out further and further.
We have gotten really tough with rentals. If the customer is not within payment terms, we’ll pick up the unit unless they’ve been clear on how they plan to pay us. Again, we find that our good customers are willing to work with us. If they say, “We’ve moved our payables to 45 days,” and they pay us on the 45th day, then we’ve got no problem. The key is to be proactive and find out how we can work with the customer and help them if they’re in a jam.
Marginal customers who don’t work with us or who dodge our phone calls are the problem. If they’re willing to work with us, we’re willing to accommodate. If they’re not, then we have no tolerance for that. We give customers the benefit of the doubt once, but the second time we get a story, it’s either pay up or we’re coming to get the equipment.
On the service side, we will not go out on a service call until we have a commitment for payment. In some cases, we insist on a check when we arrive.
Finally-and this isn’t a new thing-it’s not just the accounting department that’s responsible for collecting payment. Equipment salespeople, CSS salespeople, technicians, dispatch, all managers-anyone involved in the account helps collect the payable. A lot of times, paperwork fell through the cracks and never made it to accounting. Or if the customer’s warehouse manager finds out that he might lose his forklift because someone in accounting hasn’t paid an invoice, he may put pressure on them internally. This allows for a good cop/bad cop approach in some cases. Also, we find that if an account goes bad and a salesperson may lose a commission, they are usually motivated to help.
|Meet the Author
Bill Rowan is president of Sunbelt Industrial Trucks, located in Dallas, Texas, and on the Web at www.sunbelt-industrial.com.