Establish Credit Limits and Guidelines If you provide any services or products without full payment at the time of delivery, then you are issuing credit. A credit limit is a limit of dollar amount and time. Limits are not fixed. As you stay on top of your accounts, you may have to make adjustments. Guidelines are the terms and situations under which you grant credit. Write credit guidelines to terms that suit your business.

Check Credit and Trade References By pulling a credit report, you may learn valuable information that either makes you more confident in granting credit or leads you to a decision not to grant credit at all. The trade references should be called at the time of application. In my experience, it is generally true that most people don’t call these references.

Establish Set Billing Practices You have to have a Billing System (process). Some regime that is systematically followed without thought or question. Successful businesses do not need to reinvent the wheel. Accounting systems have been successfully in place in many sizes and types of businesses. Simply apply common sense, train everyone that systems must be followed, and stick with it.

Track Dollars Tracking dollars can reveal not only clear information to guide your AR department, but also provide clues on how to improve your operations. Every day, countless professionals work without a system of tracking their money. This allows little cracks, which can be costly, to appear. You wouldn’t say, “My sink is just leaking a little so it’s okay,” and you wouldn’t ignore a tire on your car which was only a few pounds low.

What ROI™ Really Means This is a peer-to-peer call from accounting to accounting and is purely information-gathering. Simply ask if the invoice has been received. If not, don’t insist that you sent it. Now is a good time to ask, “What is the best way to get this to you?” The other person controls your destiny now. You are on a fact-finding mission. Treat the other accounting person like a VIP. This is not the time for the drill sergeant to come out. This is a courtesy call and customer service. There is a huge benefit to this call, beyond finding out that your invoice has been received. ROI™ means “Receipt of Invoice.”

Avoid Call Reluctance For many of my clients, attorneys and others, the phone can weigh 2000 pounds.I borrow the term “call reluctance” from the sales world, but the psychology is the same. For many people, there is a serious reluctance to call and ask to get paid. Find a way around call reluctance. The system cannot work if you make the calls only when you are in the right mood. The system must be followed every time. Remember, be confident yet polite.

Plug Leaks Quickly The squeaky wheel gets the grease. Find out early what is going on. Don’t wait 60 days. That first ROI™ call can reveal little signs of problems. Look at the aging of the invoices as a sign of danger. Avoid the all-too-common evasion in simply thinking, “They will work it out.” How do you know if you don’t call to find out?

Be Reasonable It is not a bad idea to be reasonable, even in the face of unreasonable clients, as a calculated technique to getting paid and avoiding problems in the future. Depending on what kind of clients you serve, you may be used to dealing with less-than-accurate views of the world. It should not keep you from getting paid. Placing intellect over emotion will give you a competitive edge and keep you a step ahead. If something really is your fault, deal with it. I have to repeat myself here: If something really is your fault, deal with it!

Breaking Up Is Hard To Do What? Did I just suggest ending a business relationship? One that you worked so hard to obtain? Yes, I sure did. Sometimes, nothing feels as good as letting go. Include a “Cease Work Agreement” as part of your business plan. It can be either something that is presented only if need be, or a part of the terms and conditions of your contract.

Communicate — The Most Powerful Tool – The most powerful tool at your disposal is communication. Whether it is the purpose-driven, scheduled, fact-finding calls or a smiley face and a handwritten note on an invoice, communication is the key. Silence and delays reduce your success rate.

Why are businesses so afraid of asking for help these days??? Is it the fact that they don’t want to spend money (I work on a contingent fee…no upfront cost) …..are you fearful of chasing good money after bad??? Well, I hate to be the one to break it to you…BUT THAT IS EXACTLY WHAT YOU ARE ALREADY DOING!!!! If you have followed a strict Receivables Policy ( if you don’t know what that is or do not have one , please Call me I’ll help you put one together FOR FREE) but if you do have one ,once your clients start showing “RED FLAG SIGNALS”…..that is when you need to stop spending your FTE costs on these debtors, not to mention the phone bill ( most likely ONLY to have your employees lied to , hung up on, or put on hold forever), postage costs ( again they probably either have a stack of invoices unopened on their desk…if they haven’t made it to the trash can yet) and think of the money in interest, loss of expansion, loss of opportunity to engage in emerging markets THINK of what you are losing when the money is not in your account where it belongs…but collecting dust o your aging report. STOP wasting time

Enough is enough! The Government is NOT going to Bail YOU Out….SO PREPARE Yourself.

1st) Have a Strong receivables policy for both New Clients and Current Clients. Ensure you have the proper credit applications, Personal Guarantee forms, and Business Background reports in place and verified BEFORE you extend credit! If you don’t have these forms, message me!

2nd) You are running a business, not a nonprofit charity organization. Rules are Rules. Boundaries are not set to be broken and there is NO exception to the Rule! If you extend credit, and they break terms, there must be consequences. PERIOD. Or YOU will be the ones paying for their debt, in the end!

3) Contrary to popular belief, YOU do NOT need every single client that shows interest….CHECK THEM OUT. You work hard for Your money. You have a valuable business. You had to pay for what you have, so why give it away to just anyone??? When you close your doors because of lack of cash flow, and you have 100 clients sitting in your aging that didn’t pay…how did they help you?

I could talk about this all day. But I wanted to really give you some sound, blunt and straight shooter advice. I have had a client for the last two years just have to file BK because 1) she refused to listen to reason when it came to enforcing receivables policy, 2) She tried to be nice to everyone and 3) She never wanted to let go of any of her accounts for collections, because she was afraid she would anger someone. She would send them along, AFTER they closed their doors….guess what…IT IS TOO LATE THEN! NOW HER “clients” are giving HER money to HER competition and she is in the unemployment line. Perhaps I should not have written this when I was so emotional. But did I mention that my former client was 72 years old and she had worked her entire life in that shop….now she has nothing. Let’s stop the madness. America is the land of the FREE…..Free to work toward your dreams, live out those dreams…BUT not FREE to rip hard working businesses off and then skip town, or file BK, or just move away and open up yet another shell company, in yet another name. Together, with strong policy, strong follow up and a respect and professionalism, Businesses can survive even the toughest times! If you want to chat write me.

So…You make the kick and every yard run ….every task you achieve in securing your receivables takes you that much closer to YOUR COMPANY Winning the 2010 Cash Flow Super Bowl!!!! And YOU can be the ONE to lead them to this Great Success! Think of the cheers, the praise and the endorsements!

Now, the ball is in play, all you need to do to WIN is ensure that with every yard you run, you complete the Yard Marker Task to guarantee success!

The Football Field of Financial Security

10 Yards – Ensure You Have a Strong Documented and Executed Internal Receivables, Credit & Collections Policy In Place. The Best Offense is a Strong Defense.

20 Yards – Ensure that each department, staff member and manager is trained and has a clear understanding of the complete process in which they , and their department are responsible for within the receivables, credit risk and collections policy task schedule. It is recommended that all staff members have a copy of the policy. What do you think those “Play Books” are for?

30 Yards – Protect Your Receivables. Utilize all available resources to research potential clients prior to extending credit to new clients. Do Your Homework! Outline the venues that should be taking before extending credit such as a credit application must be completed and signed. A copy of your credit terms should be included within the credit application packet to ensure your customer has a clear understanding as well. Due diligence is vital when reviewing the credit application. New customers will not help you grow if they are unable to pay. Ensure you offer customers several payment type options and offer incentives when you have the ability (For example 1% deduction of price when paid Net 15 ) You may not be able to offer your clients Sky Box Seats to The Game but courtesy and flexibility is just as important.

40 Yards – Once an account becomes past due, ensure credit is suspended immediately within the aging specified in your credit policy and ensure your internal collections department follows the policy schedule with due diligence. (31 Days- courtesy call — 45 Days – reminder Notice Sent (IF NO RESPONSE BY 60 Days Past Due) 61 Days Credit Suspension—65 Days Balance Demand Call — 75 Days Final Demand Notice Sent ( If No response by 90 Days past due) 91 Days –Place with Collections Agency . If You allow a past due client to take control of the ball, they might hit their end zone without paying You.

50 Yards – Run Random and Scheduled Quarterly CBR on your current customers. Keep in mind the markets and industries are ever changing in our economy. We must be aware of the markets and credit crunch red flags if we are to make it to the end zone in 2010. Every great player must complete a physical to stay in the game !

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HALF TIME — YES Remember to Enjoy a Jumbo Hot Dog, A Nice Cold Beer and the Amazing View of Energetic Cheer Leaders and the Exciting Events of The Half Time Extravaganza during any football game. Balance is important. A proper diet, peaceful rest, social interaction …..”A half time break” … allows you to breathe and begin the next work day refreshed and objective. A Fresh Start Will Find A Fresh Solution.

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60 Yards – Communication is the Key. You never just run on the field and hope someone knows what the next play is. Openly communicate with your customers and staff to ensure there are no red flag signals.

70 Yards – Cut internal costs when you can. Offer an option of invoice delivery via email to your clients instead of spending ongoing postage fees. In a World that many are seeking “Go Green” this is a way to save money and our environment. The grass can stay green on your side of the field!

80 Yards – Work on “Going Long” Keep in mind that hard work, professionalism, established boundaries and mutual respect you will be able to keep strong communication open and build long term relationships with customers. If a customer deserves a credit or discount, (if applicable) then issue the credit or discount. ALL relationships are built on trust and compromise. One loyal long term PAYING customer is worth 1000 one time buyers.

90 Yards – Evaluation of your internal process and policy should be ongoing. Always striving for improvement. Continuously review how you can cut costs, improve credit risk, reduce DSO and increase cash flow. Watch the instant replays in slow motion and see how to improve your game!

100 Yards – Only 10 Yards to go…Success is in your sight…The thrill of the Win…End of Month Audits with a Smile on Your face …Yearly Bonus…All for The love of the game!

End Zone – YOU DID IT. YOU just won the Cash Flow Super Bowl. Your DSO is low, Your Credit Risk is Strong and Your cash Flow is High. Now it is time for the Super Bowl Party. Celebrate and Enjoy. You may not receive a Super Bowl Championship Ring , but you can wear your success with pride going forward in 2010! Now, show me your End Zone Victory Dance!

My firm, ABNA International, the worldwide leader in Past Due Receivables Management, Credit Risk and Commercial Collection Solutions, offers businesses worldwide an immediate increase of cash flow, reduction of DSO, and improvement in their internal Credit and Collections process at NO upfront cost, and without risk to your customer base. ABNA International offers solutions at the lowest contingent fee available worldwide, with the highest yield! So if you need assistance, please feel free to contact me and together we can run down the field to the end zone in 2010!

Until Next Time, Make sure your company is prepared to be “In It To Win It!”

Jennifer Stacey
ABNA International
Worldwide Credit and Commercial Collection Solutions
302 883 8564
jstacey@abna.us
www.abna.us

The bottom line, is at that point, you have probably suspended their credit lines, and placed a hold on all future orders until their account is reconciled. Yet if they are still sitting their past 90 and Past 120, it is obvious they have took YOUR money and went elsewhere. More than likely, to YOUR competition. Which means, while you are pinching pennies due to all of those accounts collecting dust, those clients are funding YOUR competitions Christmas. So what do you do now?

You have more than likely made the phone calls (which they are now ignoring), sent out final demand notices (which ended up in the trash can), mailed, faxed and emailed duplicate numerous copies of their invoices (trash can; to do next year pile and junk mail box are their home now), contacted an attorney and even had THEM send an ADL (trash again!). At this point you throw your hands into the air.
It does not have to be that way. If you did your due diligence when planning the foundation of your receivables department, there is a way to pay for the presents under YOUR tree instead of theirs….if you act soon.

First ensure you have a copy of the agreement, purchase order, any change orders, and the credit application. Gather all of that information (that you have) and contact a receivables management, credit and collections firm. Even if you decide to not call me (of course I would be greatly saddened) however there is still time to contact them and ensure results. A third party firm, like myself, can assist with asset and liability investigations, reconciliation of accounts, create a sense of urgency without alienating your client base and most of all RECIVER YOUR MONEY! Utilizing a worldwide network of certified trained collectors, negotiators, mediators, Financial Consultants, Commercial Lenders, Attorneys and Government/Embassy contacts. The burden can be lifted off of you, and within the next 30 days…That is correct BEFORE Christmas, Before EOY you can see an immediate reduction of DSO, increase of cash flow and strengthening of your overall bottom line. A third party’s involvement does not have to be intrusive. It can complement your internal process and create the urgency that your own consistent efforts will not be able to.

Contact me today , Jennifer Stacey with ABNA international. 302 883 8564 or email me at jstacey@abna.us to learn more about how my company, ABNA International can assist your business increase cash flow, reduce DSO, improve credit risk measures at NO upfront cost or without any risk to your client base!

1. Technology – Utilizing accounting software which will automatically generate and track your invoicing process is key. Also, ensure that the software is “user friendly” so you can manipulate data in a format to run key reports as needed and allows you to review your aging report in a proactive manner.

2. Offer Options – If you wish to receive payments in a timely and effective manner, offer options. Although Checks are still an active player in the payment game, there are many other payment sectors to consider. Credit Cards, Wire Transfers, and NOW Pay Pal seems to be raising the bar within commercial payment options. Fast and friendly is the key. The more options you have for customers to pay, the more YOU will be paid.

3. The Best Offense is a Good Defense – Ensuring you have a strong Credit Risk Policy cannot be stressed enough. If you have a process in place, there are no questions, no grey areas that will down the road find you in the red. Credit Applications (and the follow through of checking them thoroughly), Personal Guarantees, Electronic Customer Alerts, and a stern collections process will ensure your success in difficult times.

4. Stay Alert and Watch for Red Flag Signals. When clients begin to break terms, start to re-negotiate partial payment arrangements , break previous scheduled payment arrangements, begin avoiding your internal collection efforts (such as calls, emails, postal notices, final demand letters, faxes and voice messages), make sudden invalid disputes to avoid payment, or when your competition begins to call for credit references on these customers…TAKE HEED. Do not allow more than one of these signals to be raised simultaneously. Being friendly and understanding is always “nice” however keep in mind that how you react to these early warning signs could decide the fate of your company and livelihood!

5. Put Your Action Plan INTO Action – The key is progressive action…..being PRO –active. When a customer can see the progression of the debt recovery process they are more inclined to resolve the issue. However if you call and send letters for months on end, there is no progression. You are no longer a priority. Therefore you have actually shown the customer that you do not feel that them paying you is a priority. Most of the time, once terms are suspended (which should not exceed 30 days past terms unless payment arrangements have been scheduled), the customer is already using the money owed to you to pay your competition for their product or service. If you follow procedure consistently, you will gain respect from your customers as well as payments on accounts. Ensuring that your written internal policy ( and I say policy because that is what it should be, a process is surrounded by grey area…a policy is set in stone !) is followed will assist you in this process. The process should be molded around this model

 Original Invoice sent upon product/service request.
 At 30 days a courtesy call should be made.
 37 Days a payment request notice.
 45 Days a second call.
 45 Days Suspend Credit Terms Until Resolved or Contacted and Arrangements are made
 60 Days an email, fax or last chance call.
 75 days a final demand notice should be sent.
 At 90 days the account should be resolved, have some type of payment arrangements scheduled, or should be turned over to a third party collections firm. No ends, ifs or buts.

So, to review …Original Invoice, Courtesy Call, Second Copy Invoice, Second Call, Suspend Credit Terms, Last Chance Call , Email or Fax Notice, Final Demand Notice, Submit for Collections. This process will secure your cash flow as well as show the customer that you have respect and hold a true value for your own product and service by taking a firm request of payment owed.

6. It Is Not A Question Of “Should I” But a Question of When and To Whom: If clients avoid your contact for a thirty day period, begin to waive more than one red flag signal simultaneously, or you complete your internal scheduled collections process without results… the account should immediately be turned over to a collections firm. If you utilize a firm such as mine, ABNA International, we offer an audit approach campaign for customers in the Early Warning Sign phase. Creating the sense of urgency for your clients to pay you without alienating your customer base. ABNA will act as an extension of your internal receivables department, contact the customer and make them aware that the account is being audited and work with your customers to resolve the balance prior to months end, quarters end, years end, etc. Once our customer determines that a more progressive stand needs to be taking , the account is transferred to our Straight Collections Division and of course legal would be the following step however only 2% of our accounts are ever transferred to legal and only with the clients permission. With offices ,collectors, mediators, Attorneys, Investigators and Embassy/Govt contacts in 63 Countries, there are never any law, regulation, time zone, language or business cultural barriers when utilizing the services of ABNA and the contingent fee is not bias of the region of the world the debt resides. If ABNA does not collect the funds for you, you don’t pay them. So there is no risk UNLESS you choose to hold the past due accounts and watch as the time passes by and your chances to collect diminish. Keep in mind. Debt is not like fine wine, it does NOT get better with age!
Rather you choose ABNA International or another third party agency, ensuring that you have a third party to rely on when you have completed your internal collection measures is crucial.

If you follow the above recommendations and prove to be diligent in your internal process, you will be rewarded by increased cash flow, reduced DSO, improved credit risk and an overall stronger bottom line . Success is at your doorstep, will you take the necessary steps to open the door and welcome it?

My company offers cash flow, credit risk and collection services worldwide. Now you may say, well of course YOUR BUSINESS is booming…everyone owes money. However I am not paid on accounts placed for collections, I am paid a contingent fee of the accounts that are placed, that ARE collected. If my clients don’t get their money, I don’t get paid! Mo Cure, No Pay! I am involved in both facets of you’re the business that seems to be struggling the most worldwide right now! I am in sales…I bring in new clients to assist with their receivables, credit and/or collection issues at NO Upfront cost. And then I have to give their clients the support and assistance needed to ensure they can not only pay my clients, but their other creditors as well. I ONLY charge a 15% contingent fee, and that is ONLY after my clients receive the money owed to them….and 15% to business owners today is a lot. Sometimes it is the profit…period.

Of course, when I ask them to hold out their hands…open with palms up and say to them in one hand you have nothing….no money….all debt…..what if I told you in the other hand…I could give you 85% of what is owed…of what your internal collections department has been thus far unable to recover….then they SEE the picture. They SEE for themselves, what any reasonable business or financial executive would see…85% of what is owed or 100% of absolutely nothing.

The world see’s the RECESSION everywhere they go. We, as sales people need to allow them to SEE a solution. Visualize the money in hand. Visualize the loss in the other hand. SHOW the benefit. Make them SEE the profit in using your service. Now, I work with my clients debtors and assist them in rehabilitating their payment habits. I have a network of financial consultants, turn around management companies, and commercial lenders that help my clients customers pay what is owed and get them back on track. So I have the luxury of bringing in one client and assisting two, which is probably why many of our debtors become clients. Laughing. I also offer many free resources just for my clients to place those collection accounts with me. ADDED benefits without cost. MORE FOR YOUR BUCK…..that is what everyone is looking for , especially when the BUCK doesn’t stretch as far as it used to. So I offer assistance with credit reporting for free, I offer samples of applications, policies, forms and other documents to strengthen their receivables on the front end, so they don’t need me as often of the back end, for free. I offer online courses for free to my clients to assist in their internal cash flow, credit and collections process, as well as access to many articles and materials to benefit them internally. MORE FOR YOUR BUCK.

With our debtors, my clients, customer’s, I treat them with the same respect and compassion, as I do my clients. Because I know that my clients want them to continue to be their customers, they just need to be paid. So being customer service oriented when collecting on past due accounts is of the utmost importance at all times. You can show your debtors , have them visualize the scenario of not having their vendors to count on and ending up closing the doors…or you can offer them a solution…assistance in their time of need.

The bottom line and point I am trying to make today in this blog is that a strong SUPPORTED ( supported meaning your company better be willing to back up whatever your sales team offers your clients) sales department needs to be able to allow their potential clients to visualize the benefits of your product or service. Just as strongly as they are being fed visions of recession and desperation and doors closing worldwide….and then they need to make that vision come true. On the back end, if your receivables and credit department are all about numbers and don’t have the mentality to be compassionate while being effective with your clients…someone else will be. And then you are there standing ….with your hands open , palms up , empty handed and those customers are either feeding your competition or closing their doors leaving you with 100% of nothing in this recession.

With this said, are you aware of the many red flag signals? And what is your course of action once these signals appear? The recognition of these signals and the steps you take following are imperative to ensure your cash flow is retained and liability is limited.
Red Flag Signals
A few of the more apparent Red Flag Signals which should immediately raise your brow and require recourse action. Are as followed:

• Customer begins ignoring internal collection efforts
• Customer requests more than one duplicate copy of the original invoice sent
• Competition begins contacting you for credit references
• Sudden invalid disputes to avoid payment
• Customer claims financial distress to avoid payment via terms
• Customers buying habits increase , yet their payment habits decline

Course of Action Once Flag Is Raised
Once the symbolic red flag has been raised, immediate action should be taking. What is the best course of action, you may ask. After working in this industry and speaking (and assisting clients on a daily basis with these matters), the following steps have proved to be most effective, as well as within the timeline recommended below.

• Immediately upon Red Flag Signals being raised, a direct call should be made to the customer. If the customer is unavailable a voice message DIRECTLY in their voice mail should be left ( do not waste your time leaving messages with an assistant or employee, the customer should be able to hear the sense of urgency in your voice for themselves) Let them know that as you value them as a client, the situation has been flagged and in order to avoid credit suspension you wish to speak with them within the next 24 hours or the account will be placed on hold.
• If you do not hear from the client within 24 hours, the account should immediately be placed on credit hold.

• Following the Credit suspension, a final demand notice should be sent registered mail, also fax and email a copy as well ( this is imperative for those that have stated they did not receive the last two invoices sent). The Final Demand Notice should be clear and concise. Offer the client 5-7 business days to resolve debt and ensure you outline the consequences if the payment is not made. For instance, “If [payment is not received in full within 5 business days, you will not be eligible for credit terms for a period of three months and the account will be submitted to an outside collection agency for immediate payment resolution. You will be responsible for all collection and/or legal fees as well as additional interest charges that evolve from this debt”. Have the Final Demand Notice ( FDN ) require a signature upon delivery which will prove it was received and add to confirmation of additional charges they will be billed for if the account is placed with collections.
• Once the Final Demand date has passed, accounts should be immediately submitted to an agency and make them aware of the additional charges involved and stated in your FDN, such as interest and collection charges. Ensure you send a copy of the last invoice, as well as a copy of the final demand notice to the agency so they are well armed with documentation to proceed and collect your funds!

Although these steps may seem harsh to some, it is a much better alternative then to suddenly receive documents from the court stating the customer has filed for Bankruptcy. It also allows you the upper hand, in the situation where as the customer decides to not pay you, but continue with your competition.

These are only broad based signals and steps, for more in depth assistance, at NO cost to evaluate, simply contact Jennifer Stacey at ABNA International. ABNA International offers World Wide Receivables, Credit & Collection services at NO upfront cost or risk. Offering the lowest contingent fee (We DON’T get Paid, Unless You Get Paid) in the industry , with the highest resolution ratio! Receive IMMEDIATE reduction of DSO, Increased Cash Flow, and Improved Credit Risk at NO upfront cost, EVER!

ABNA 001 302 883 8564 1-302-883-8564 jstacey@abna.us www.abna.us www.abna.us

The foundation behind account receivables is your policies and procedures for sales. For example, do you have a credit policy? When and how do you evaluate a customer for credit? If you look at past payment histories, (Yes, someone MUST follow through on those credit applications, and then they must DIG DEEPER!) you should be able to ascertain who should get credit and who shouldn’t. Additionally, you need to establish sales terms. For example, is it beneficial to offer discounts to speed-up cash collections? What is the industry standard for sales terms? There are several questions that have to be answered in building the foundation for managing accounts receivables.

A system must be in place to track accounts receivables. This will include balance forwards, listing of all open invoices, and generation of monthly statements to customers. An aging of receivables will be used to collect overdue accounts. You must act quickly to collect overdue accounts. Start by making phone calls followed by letters to upper-level managers for the Customer. Try to negotiate settlement payments, such as installments or asset donations. If your collection efforts fail, you may want to use a collection agency. Keep in mind that once an account reaches 90 days past due, the probability of payment in full drops considerably, by almost 30%! ABNA International offers Receivables Management, Credit Risk and Commercial Collection services worldwide at NO upfront cost. Unless you receive the money owed to you from your client, through their collection efforts, you never owe ABNA a dime.

Also remember that the collection process is the art of knowing the customer. A psychological understanding of the customer gives you insights into what buttons to push in collecting the account. One of the biggest mistakes made in the collection process is a “sticks only” approach. For some customers, using a carrot can work wonders in collecting the overdue account. For example, in one case the company mailed a set of football tickets to a customer with a friendly note and within weeks, they received full payment of the outstanding account. ABNA international may not mail out football tickets, however they have been in business for many years and have learned that “One Size Does NOT Fit All” when dealing with collections. This is why they have a vast network of Financial Consultants, Mediators, Collectors, Negotiators, Investigators and Attorneys strategically based throughout the globe to ensure your clients receive the assistance they need to not only pay YOU , but their pother creditors as well.

Measurement is another component within account receivable management. Traditional ratios, such as turnover will measure how many times you were able to convert receivables over into cash.

Example: Monthly sales were $ 50,000, the beginning monthly balance for receivables was $ 70,000 and the ending monthly balance was $ 90,000. The turnover ratio is:
.625 ($ 50,000 / (($70,000 + $ 90,000)/2)). Annual turnover is .625 x 360 / 30 or 7.5 times. If you divide 360 (bankers year) by 7.5, you get 48 days on average to collect your account receivables. You can also measure your investment in receivables. This calculation is based on the number of days it takes you to collect receivables and the amount of credit sales.

Example: Annual credit sales are $ 100,000. Your invoice terms are net 30 days. On average, most accounts are 13 days past due. Your investment in accounts receivable is:
(30 + 13) / 365 x $ 100,000 or $ 11,781.

Example: Average monthly sales are $ 10,000. On average, accounts receivable are paid 60 days after the sales date. The product costs are 50% of sales and inventory-carrying costs are 10% of sales. Your investment in accounts receivable is:
2 months x $ 10,000 = $ 20,000 of sales x .60 = $ 18,000.

Measurements may need to be modified to account for wide fluctuations within the sales cycle. The use of weights can help ensure comparable measurements.

Example: Weighted Average Days to Pay = Sum of ((Date Paid – Due Date) x Amount Paid) / Total Payments

Example: Best Possible Days Outstanding = (Current A/R x # of Days in Period) / Credit Sales for Period

Receivable Management also involves the use of specialist. After-all, you need to spend most of your time trying to lower your losses and not trying to collect overdue accounts. A wide range of specialist can help:

- Credit Bureau services to review new customers. (ABNA International offers these services to clients at as a courtesy, simply as our way of saying Thank You for your partnership!)
- Deduction and collection agencies ( ABNA International offers many campaigns such as DSO Reduction ( we also assist your clients in rehabilitating their payment habits going forward) EOM, EOQ, EOY Cash Flow Collection Assistance, Credit Risk Campaigns and Commercial Collections at a no upfront cost or risk basis. “No Cure, No Pay”.
- Complete management of billings and collections (ABNA International offers Complete/Partial Receivables Management from Cradle to Grave , allowing lower FTE Cost, Less Headaches and a centralized receivables Solution).
Article Written By Jennifer Stacey
ABNA International 302 883 8564 jstacey@abna.us www.abna.us

As a credit grantor, you should be aware of some basic principals when extending credit to clients:

• Extending credit carries an unavoidable element of risk. You will experience cash flow loss through debt regardless how carefully you screen and babysit your potential and current client base. Unfortunately is a “Fact Of Life” for Financial Executives.

• There are fundamental policies that you MUST create, implement and consistently enforce to achieve your most successful Cash Flow profit. Of course No Policy ensures No Risk involved, however if enforced, the risk can and will be minimal.

• Both parties must have complete definition of all credit terms and conditions involved within the credit agreement. The agreement MUST be signed by BOTH parties. Proper One-on-One review with each new client agreement is not only necessary, it is also crucial in the outcome.

• Consistent and diligent follow up of every account should be documented and verified.

• “Financial Check Up’s” should be completed on new, current, and long term clients regularly.

• Accounts should NEVER move from one aging bucket to the next without being placed with a third party collections firm UNLESS extenuating circumstances or payment arrangements agreed upon with signatures are in place

• Make Your No Mean No. Once terms are broken and you agree to a new payment arrangement, DO NOT revise again. Your Yes MUST mean Yes and Your NO Must mean NO. If not, there will be no respect, or adherence to any policies by your customers and your company and payments will never be a priority.

Extending Credit

As an extender of credit, your business is one of many that allow organizations to use goods and services immediately and pay for them later. Meanwhile, they usually make immediate profit from your goods and services. Therefore there should be no reason for your clients to break terms. While extending credit increases sales, it also puts you at risk. “Being Paper Rich and Cash Poor, is never proactive”.

Most businesses average .5 to 1% of their total sales volume annually. If your debt is estimated above 1%, immediate restructuring internally of your Credit and Collections process is advisable.

When Do Accounts Reach the Terminology…. Bad Debt

We will break this down very simply. Bad is used as an adjective to describe a negative action or emotion. The opposite of something being positive or profitable. Debt is money that is owed, or a balance that is unpaid, delinquent or past terms. So, technically, bad debt is any amount of money that is owed to your company, which is not paid exactly as agreed upon in your initial credit term agreement.

Why financial executives seem to believe that debt is not bad until it surpasses 120 days, is beyond me. However I would like to inject a short statistic here. Did you know that with each aging bucket, probability of payment declines by 13%. So, again, DEBT is NOT like fine wine…IT Does NOT get better with age!

Reducing Bad Debt

Now, your internal written policy including detailed and scheduled procedures is pertinent at this point. If not in place, or not enforced, accounts can quickly go from “collectable” to “write off” in a matter of weeks. Again ensure you have a strong policy with definitive process implemented actively and ensure that it is enforced without exception, unless signed off by YOU and only in extenuating circumstances.

If your internal collections department has completed:

• First courtesy call thanking customer for business and reiterating invoice due date prior to due date (average day 25 )
• USPS Late Payment Notice ( average day 35 )
• Completed a Second Call requesting payment ( average 40)
• Emailed/faxed a second copy of invoice ( average day 45)
• Certified Mail/Email or Faxed a Final Demand Notice mentioning third party involvement if payment is not received by demand date ( average day 50 )
A successful in-house policy must:
• be tough yet flexible
• have specific guidelines of action
• contain self-evaluation
• be consistently enforced

Never move backward or repeat a step in the hope of salvaging an account.

When to Hire a Professional Collector

As an account ages, the chances of collecting on it decreases dramatically as we discussed previously in this article. It’s expensive to carry accounts that you will not be able to collect using the methods at your disposal. It’s often a better use of your company’s time and resources to concentrate on other aspects of your business. A Professional collection service can assist you in collecting accounts that remain delinquent. Collectors have a vast knowledge of collection techniques, technology and compliance issues. Using a professional collection service will save time and likely yield better results.

Look for the following signs that you may need to work with a collection service:

1. A new customer does not respond to the first reselling notices. For some unknown reason, the client will not or cannot pay. Potential losses could be kept to a minimum by prompt referral to a collection service.

2. Payment terms fail. In some cases irresponsible customers pay when and if they want to. This group is responsible for 20 to 48% of the cost of collections. Cost and potential losses are reduced by quick action.

3. The Customer begins making sudden invalid disputes to avoid payments. . Such clients are often better handled by collection specialists.

4. The customer avoids and ignores your internal collections process ( calls, voicemails, notices, and demand correspondence) Without professional help, these accounts are usually written off as total losses.

5. Delinquency coexists with negative or low profit margins within the specific customers industry.

6. Obvious financial irresponsibility is apparent. If YOUR competition begins contacting you and requesting credit references, the probability of in-house collections is virtually impossible,

Working with a Third Party Collection Firm

Always research and compare third party collection firms.

• Be sure to have them submit their business license, certification and client bond package. Do NOT move forward without this documentation.

• Compare their contingent fee to industry averages. If a firm is requesting over 25%, continue to shop around .Make sure there are no additional fees for any of their services.

• When Shopping ask if the firms have any available Receivables Management or Credit services besides collections at the contingent fee (again there should be NO COST for these services)

• Ask about status reporting. Ensure that you will receive a status report regularly. You are the client. You are the one who should set the rules from the very beginning. Tell them what you want. If you want weekly reports. Tell them. If you want monthly reports verbally and bi weekly spreadsheet reporting sent electronically, tell them. If certain agencies can not adhere to your needs, someone else can! Just as with a potential client, it is important that both parties have a clear understanding of what the other expects.

• NO CONTRACTS. Never sign a contract with a Third Party Collection Agency. This binds you to a firm for long periods of time, and usually they will have a buyout clause, stating that if you pull accounts you have to pay them a certain percentage for their activity on those accounts in order to close them out. This is NUTS! Bad Business created by agencies usually that have low conversion collection ratios ( the time period from placement to client remittance of payment)

Working with ABNA

The process can be quite simple. I know that within my organization, ABNA International, you can submit accounts by simply emailing or faxing a copy of the last invoice or statement if you wish to place random accounts for collections. If you need to “Clean Up” the receivables or execute an “Audit Debt / Research and Debt Rescue Campaign” in order to move forward effectively and productively, you can simply email a snapshot of the aging buckets you wish to place. There are no upfront costs and the contingent fee stays the same for this campaign as with all collection placements. I offer all potential clients copies of our License, certifications and Client Insurance Bond prior to beginning the process, simply for their own piece of mind and internal records. Within 72 hours of receipt of the incoice, statements or snapshots for placement, our clients receive an initial status report, followed by both electronic and verbal reporting scheduled at my client’s convenience. ABNA International creates the sense of urgency for your clients to pay without alienating your customer base. We can assist your clients with the rehabilitation of their payment habits, and they can then move forward successfully with you. Once you, the client, receive the funds through our collection efforts, ABNA simply invoices our clients 15-17% (depending upon age, balance and condition of predicted account placements) of what our clients received. ABNA International has offices, collectors, mediators, financial consultants, Government/Embassy contacts and Attorneys World Wide. There is never any language, time zone or business culture barriers when partnering with ABNA International to assist you in collecting debt. ABNA offers their clients many Free Services as well. A library of documents, agreements, applications, checklists and articles to assist your internal receivables department. We also offer Business reports on potential clients to assist you when determining your credit terms with new clients. I also offer “Financial Health Check Ups” for your current and long term clients…FREE .It is always better to be safe than sorry! I also offer assistance during peak sales season by executing follow through on credit applications completed by your potential clients. Understaffed? Sales are booming? Email me a copy of the credit applications you have piling up, and within 24 hours, they will be complete with detailed notations attached when returned. All of this is free, as a Thank You for being a client of ABNA!

Rather you choose ABNA International or another third party collections firm, the bottom line is this, USE ONE. When clients break credit terms and there are no consequences, the probability of payment is minimal. Once you suspend their credit, and they still do not pay, it is because they are giving YOUR money to YOUR competition.
PLEASE NOTE Do not place an account with more than one collection service. Make sure that if you change collection agencies, the account is only being worked on by one service.
Review:

• Create, Implement and Enforce a Strong Receivables Policy.

• Make other Departments aware of the process and ensure they abide by the policies (Sales, Customer Service, Etc.)

• Ensure all documents are Signed by the Client. This includes all docs from cradle to grave! Credit Applications, Contracts, Purchase Orders, Change Orders, Shipping Receipts and Certified Mail receipts for Final Demand notices. You name it, have back up. This will one day be your saving grace! Keep in mind that the more ammunition that you have when going into battle (attempting to collect from a difficult debtor) the better chances of success you will have.

• Offer Respect, Personality and Courtesy! Just because you are not available and displayed on the “Front Lines” of your organization for all customers to see, does not mean that you cannot be the one whom offers that extra mile by offering a satisfying experience within receivables. Be personable. Be direct and Be NICE! Remember, you can catch more bees with honey…and you can collect more debt with PERSONALITY!

• Once the Collection Process Schedule is complete internally, automatic submission of accounts to an agency is vital. If your collection efforts are exhausted- If you have made the calls, sent the notices, final demands by 91 days, then each month you should be submitting any and all accounts that enter that 90 day aging bucket. You will not lose clients, you will gain respect, and if you choose the correct agency, your clients will have assistance in rehabilitating their payment habits so you can still proceed forward in a productive and profitable manner with your clients.

In a recent study performed by Flagmen Research Center the primary concern of CEO’s is that of their current cash flow process ,”lacking” . It seems that businesses worldwide have identified this as a concern. But what are they actually doing about it?

This is the First of a Ten article series, I will be writing. Each article will discuss each one of the 10 reasons why Internal Collections Fail, and in retrospect why cash flow is plummeting. Let’s start with the first reason of internal failure

LACK OF POLICY

Now folks, in order to do absolutely ANYTHING effectively in your life, there are steps you must take to do so. Can you drink a glass of water, if you have not filled the glass with water? Can you start your car if you have not put the key in the ignition? Would you begin putting your pants on, by first zipping your zipper? Would you begin watering your garden before you planted the seeds? These questions are of course very simple and common sense oriented. However, so is the cash flow process? Without policy, a written scheduled directive of the flow process for an internal receivables staff to execute, how can you possibly believe that your business will succeed?

Lets use accounting terminology to bring this point home…Would you send a final demand notice to a client whose invoice is not even due yet? Would you extend a credit line of $50,000 to a company who had dissolved 4 prior business ventures in the past 3 years and simply changed their company name to escape past creditors? If on your aging report you see a client who had a balance due in each bucket from current to 180 days , would you approve credit again on their next order? If a client called you and said YOU ARE NOT MY PRIORITY , I have other vendors that need the money I owe them more then you do, would you continue to act as their bank, just to say you have them as a customer?

Now for you these scenarios may seem silly. However in my line of business, they are facts. I have clients that before they came to me, there was no policy. I have clients that had taking the time to create a policy and send out a memo re the policy, but it was never executed or acted upon. I have clients that had created, and implemented and trained their staff, however it was never enforced. Each individual employee made exceptions to the rules…then I received phone calls from potential clients in desperate immediate need. From an extremely HIGH DSO, to hundreds of thousands of dollars collecting dust, rather then cash flow, sitting in their aging buckets, to clients with a desperate need to find their customers that were giving credit without any prior check up and suddenly they had disappeared. Sound familiar?

CREATE, DOCUMENT, DELEGATE, EXECUTE, ENFORCE, & MEASURE POLICY.

O.K. Now it is time to sit down and CREATE your cash flow policy. Consider all aspects along the flow process. From potential client screening, to data entry and follow through of credit applications, to the documents that should be included in your credit screening package ( ensure signatures are requested on all documents), to the criteria schedule of credit terms and conditions extended, “new client tracking “, annual current client “check ups”, a strict schedule of the collections process, 1 courtesy call prior to due date, 2 calls post date, 2 late notices, 1 final demand and then submission to a third party agency. Also always ensure there is ONLY 1 employee with the authorization capability to extend payments arrangements and lift suspension of credit without payment. If everyone has the authority to make exceptions to YOUR policy, why are you creating it?

Now, Document your policy in writing for your accounting staff , sales staff, and customer service staff to review. You may say why would Sales or Customer Service need to review and understand MY receivables Policy. I’ll tell you why. When a salesperson is to the point where they are getting ready to close a sale, their heart is beating, their blood pressure is high, they are excited…they are going for THE CLOSE. Do you think that a credit application being incomplete is going to stop them from making that sale? Do you think that a Customer Service Rep who has been appeasing a client for 20 minutes into her lunch break is going to continue and try to gather all of the facts regarding the dispute, or are they going to tell the customer they will issue a credit so she can run to the break room and get the latest “water cooler” gossip? Can you walk properly if only one leg moves? Can you pick up something if only 2 fingers bend for grasp? Everyone involved directly, and indirectly should know what the policy consists of. From credit applicant screening, to criteria for credit terms and conditions, which documents are in need of signature and once you extend credit, who will be watching the new client for the first year, to ensure habits don’t change. Every single step should be outlined as a directive in writing , and each person within your organization should know their part. This is important when writing your policy, ensure you DELEGATE responsibility for each item to a department head or specific title within your organization. using individual names if non productive, you don’t want to have to change the document each time an employee comes or leaves. However using a title or department head shows who is responsible for each directive and they will be the ones to hold accountability. The salesperson should know they can NOT close that sale until that credit application is approved. The Customer Service Rep should know she can NOT offer a credit without all of the facts. Your collections team should know that after 3 phone calls, 2 voice messages, 2 late notices and a final demand letter 2 weeks ago, the account is immediately placed into collections BEFORE it rolls into the 90 day bucket. (these are just examples of collection schedules).

You have created your policy, you have documented it, and you have delegated the procedures and responsibilities. Now it is time for execution. Do not think that simply because YOU understand the process and procedures within your policy that your employees do as well. I am not saying that they are not as intelligent, nor am I saying that you do not know how to write effective policy, what I am saying is that EVERYONE should understand clearly, so to have as little trial and error proceeding forward. So, meet, speak, answer questions, explain, reiterate. ENSURE that each department, each manager, each employee knows their responsibility and that of the other departments. If a client calls and wants to place an order, does the customer service rep know who to contact for a credit application? If a sales person receives a call and their client requests an extension of credit terms, who should they contact? All of this is menial yet crucial! You can breathe now. Believe it or not, the tough part is over.

Now, with enforcement, this should be easy as long as you made your policy clear and concise with limited flexibility available. There will be trial and error, it is new and different. Not only internally but with your clients as well. No one is happy about change, until they see the benefits from that change.”Through Change, Comes Growth”. Take complaints, ridicule and whining in great stride. In the end, your cash flow will improve, your bonus will increase and your businesses reputation will by far be complemented. Last but certainly not least is the CONSISTENT MEASURING OF THE POLICY. Do not be mislead when I said the hard part was over. There is ALWAYS room for improvement. On a monthly basis, you should review your financial reports. On a monthly basis assigned employees should monitor and measure the new clients who have been extended credit and ensure there are no red flag signals emerging. If there are, there should be IMMEDIATE measures taking to prevent loss. Annually, all clients, new, current and even long term customers should receive a financial “check up”. Not many thought that Boscov’s or KB Toys would file for Bankruptcy. One year EVERY salesperson on earth wanted to meet with their VP of Purchasing, the next year, they were in the process of dissolution. Do you think a salesperson today would want to meet with them? Of course not, there is no need, because the company filed BK.

So the point is , YOU never know, but you can secure the amount of loss through regular checkups and research. Each month, following your newly expedited policy, there should be improved on your receivables. Each quarter there should be improvement. Now when you get to a point that there is no improvement, don’t stop there. Revisit your policy and see what tweaks you can add to bring ongoing improvement. Until the next article, I wish you continued success and Increased Cash Flow!

Jennifer Stacey Director of New Client Portfolio Development ABNA International Direct: 302 883 8564 E Connect: jstacey@abna.us site: www.abna.us