Collection in the business plan

The development of the business plan in the creation of a new company is undoubtedly the core point that will largely determine its success or failure, many are the factors to consider within its development, primarily economic and market, but… when talking about the topic of potential income or SWOT analysis, we usually talk about the numbers assuming that all the money that is billed must be collected in a timely manner, that the weaknesses or threats will always come from more or less factors predictable as the competition or the market itself, but WHAT IF CUSTOMERS DON'T PAY?

For the development of a correct administration of the collection function in a company, it is necessary to have a clear and well-defined strategy that allows us to face the possible causes of a delay in payment, but also to take concrete actions when they arise. so that these are not repeated.

According to the above, we could consider that the bases on which an effective collection system is built are essentially three:

1- Prevention

Prevention is a fundamental step to avoid free problems in the future, that is, we must work on the causes that generate the most common problems instead of trying to solve them once they arise, in other words, preventing implies preventing certain collection problems arise by eliminating them from their origin, some clear examples of this would be the following:

A “well done” credit investigation

A frequent problem in collection occurs when granting a credit to a company or person that in principle should not have received it, for not offering the guarantees or qualities of moral and economic solvency necessary for it, it is impressive the number of businesses that base their decisions only in hunches or in a very limited vision of the potential risks, without searching thoroughly for a method to calculate the real probability of payment from the study of the background or finances of the eventual buyer.

Now, when we talk about a well done credit investigation, we are not necessarily referring to a more in-depth credit study that in all cases includes broad, technical and detailed information on each prospectus, as this would be impractical, therefore. The concept of "Credit Research" should be considered as a variable that in principle is adaptable, among others, to the following characteristics:

1- The type of client that I am going to analyze: This will define to a great extent the type of information that could be required, since the same information is not obtained from a physical person as from a moral person.

2- The profile of the market in which the business will operate: The activity of our clients, the type of business, the profile or average preparation of those who manage, etc. They are indicators that will help us see what information I can obtain, for example, it may be that my policy is to obtain financial statements to make an analysis of profitability, liquidity and solvency, which in principle sounds good, but what happens if my clients are small Merchants with little or no experience in business management, who simply do not have this information, if so, very rarely customers will meet the requirements of our research.

3- The amounts of the credits to be granted: Much of the information necessary to evaluate a candidate to receive credit must come from himself, so he will be more willing to share certain sensitive information if the credit is of a significant amount, which most likely will not do if the credit is less. Furthermore, we must not forget an elementary principle in the credit analysis, "The greater the amount, the greater the risk."

4- The positioning of our product with the client: It is obvious that the client will be more willing to meet requirements or cooperate if we represent an important supplier for him, otherwise his cooperation will be minimal if we ask for too many requirements.

5- The requirements of the competition: Studying the competition and knowing in depth the requirements that it asks for the granting of a credit will allow us to better establish our conditions, if we find that the competition does not ask for requirements to grant its credits, it does not mean that are more competitive, but are simply taking a higher risk.

Compliance with sales and after-sales deals.

In prevention, the commercial area plays an important role, who should present to the client only those characteristics that our product or service really has, without exaggerating or creating expectations in the client or user that subsequently will not be met, dissatisfaction is often one Of the obstacles to the payment being consumed, let us remember that for an unsatisfied customer, the revenge resource is "Now I don't pay them."

On the other hand, the fact that the company has an after-sales service or customer service scheme, greatly facilitates the management of collections, as it prevents possible complaints and dissatisfactions that customers may have by reducing claims at the time of collection.

Identification and cancellation of internal delinquency generators

This point of Prevention is basic and has its foundation in the principle of the predominance of the "important over the urgent" referred to by Stephen Covey in his book "The 7 Habits of Highly Effective People".

The principle is simple, we usually spend most of our time busy solving urgent requirements that, in turn, stemmed from some activity that in most cases was preventable. Then, then, the urgent thing is the consequence, while the important thing would be to work on the causes to prevent the incidence from occurring.

For this, it will be necessary to carefully study all those possibilities of internal errors that have the potential to become reasons or arguments of non-payment for our client

In the case of collection, we can identify the arguments of “Non-payment” exposed by our clients with overdue balance more frequently, analyze them and see which of them really have their origin in our own organization, for example:

Delay in the delivery of merchandise due to the lack of an order picker Poor services by our courier company for the delivery of invoices Excessive requirements on our part to deliver an original invoice Too many procedures to prove a return, etc.

2- Administration

Undoubtedly, another key element in collection is the “Strategy”, that is, collection, like any tactical activity, requires prior planning and organization that guarantees the most satisfactory result, successful results are never the product of chance, behind they are, among other things, the timely design of a whole system that guarantees that things will be done only in one way, "of the Best" and, of course, that they will be in charge of the most capable people.

We could divide the strategy into two main segments, which are:

Politics and procedures:

If we understand work as a game, the policies would be the rules of what can and cannot be done and the procedures the instructions that, step by step, would tell us how to play.

The policies are general and speak of the complete operation of the area, they must be aligned with the philosophy, regulations and policies of the rest of the departments involved, the procedures on the other hand, are drawn up to describe in detail how to do each of the activities. or functions that an area or a person must perform so that regardless of who or who does the work, it is always done as planned, which the organization has obviously identified as the best way to do it.

The first policy to be determined in the operation of a credit and collection area is the one that defines the bases on which loans must be granted, clearly establishing whether the policy will be liberal or conservative; A liberal policy is one that allows you to run a greater risk, while a conservative credit policy is more restrictive asking for greater requirements to be a subject of credit.

Positions, Profiles and Functions:

It is not only about creating rules and establishing how activities are to be carried out, to guarantee their fulfillment it is also necessary that the people who are in charge of fulfilling said tasks have the knowledge and skills necessary to carry them out Hence, it is important to define in advance the positions to be created as well as the profile of the people who must fill them, including the knowledge, skills they must have and the training they must receive.

3- Management

The management part is undoubtedly the most important of the above as we can have designed an excellent collection system with adequate prevention processes, a strategy according to the characteristics of the market and our company, manuals that clearly define the profiles and functions of our team, but if in the end we do not manage, then the above is useless, on the contrary if we could manage without the above and in fact most companies lack strategy and prevention based solely on management, and although the results they get are not optimal, at least they keep the portfolio in action.

Personally, I consider that management can be summed up to one point.

"Collect, Collect"

The work of collection does not reside only in knowing the techniques, but in applying them, that is, one must be proactive to achieve results, one cannot simply go to the office, sit at the desk, approach the phone and fold your arms and wait to see how many customers call today with the intention of catching up.

For this, it is necessary to consider the appropriate equipment and infrastructure, if the collection is going to be primarily telephone, it is necessary to have sufficient lines, computers with the appropriate system to manage the collection, which implies having at least Excel and an agenda that reminds us of administer the steps we make with our clients and follow them up.

Taking forecasts within the aforementioned points when preparing the business plan allows us to have a clear and adjusted view of reality from the beginning, covering at all times one of the most vulnerable and little-anticipated points in business, late payment.

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