The greatest asset and the most misunderstood. Have you started to analyze in detail how the financial state of the company is integrated? If you do, you will perhaps find yourself among the vast majority of industrial, commercial or service companies that make up 40 to 70% of their assets in the accounts receivable line, think now for a moment, what would happen if that asset will it simply cease to exist?
Exactly, a significant reduction in the size of the company with the consequent crisis since when this asset disappears, the liabilities on the other side of the balance sheet do not disappear.
Accounts receivable, sometimes ignored, other times neglected, are today the key in the successful development of business, they are "Money waiting to be taken" they are also the most available asset after cash in hand and banks already that unlike inventory, they no longer have to go through manufacturing, storage, transfer and placement processes with clients.
Accounts receivable are there, just waiting for you to change your mind about handling credit sales.
And it is that credit sales represent an average of 80% of the total sales of a company which is not a minor thing, nowadays the correct handling of accounts receivable represents the difference between earning higher profits or losing.
With all the above, it is curious that the businessman still considers credit as a necessary evil and collection as the "dirty part of the sale" instead of investing in professionalizing and developing the area of management of accounts receivable to the highest level.
The area of credit and collection is sometimes like the garbage dump of the company, where everything that goes wrong in any of the other areas ends, if the seller committed to something that he could not fulfill, that will be a reason for the customer stop your payment, if the shipping area did not schedule the shipment on time they will tell the credit and collection representative when you contact them, if the invoice is wrong, the same.
Unfortunately, the credit and collection areas do not have a customer service profile or complaint handling to be able to solve these scenarios and what is more, the way in which their performance is measured does not help at all in the proper management of relationships with internal and external clients as they are invariably evaluated by the average days they take to collect (DSO or Portfolio Days) and by the Percentage of Overdue Portfolio (% Bad Debt) and this implies that no matter what has to be done, in the end per month it will be necessary to charge as much as possible regardless of the relationship with the client.
But if we analyze it calmly, we will see that the indicators of portfolio days and Percentage of Overdue Portfolio are nothing but indicators to measure the probability of increasing cash flow but they do not help in any way to measure the generation of value of 80% of sales of the company, that is, sales on credit.
I am going to ask you a question, Is the arrears in accounts receivable bad? Your automatic answer is probably "Yes" let me rephrase the question "In all cases, invariably, is the arrears on accounts receivable bad?" I think the correct answer is depends, on what? Of the value of each particular business, let me give you an example.
I have a batch of merchandise in the warehouse that is out of season whose storage cost threatens to be postponed until the following season and there are still 10 months left for this, which will imply a loss in the value of the business of selling that merchandise of 5%; Suddenly and without waiting for it, a client appears interested in merchandise of this type, but wants to buy it on credit, what to do?
Of course we would proceed to review your credit application but we found that it is a new company, that it still has no history and the little that is known about it is that it is usually up to 3 months late in payments, in addition the owner has little experience in the bouquet, do we authorize the order?
Of course not if we think in terms of the traditional role of the credit and collection area as risk containment.
Of course Yes, if we think of the credit area as a generator of value.
These are just some brief reflections based on the Profit System on B2B Credit Management, which is considered the latest revolution in credit management and collection, and without a doubt, from its founder Abe WalkingBear will be the international Standard for this sector in the coming years..
The truth is that without a doubt you have to look back at this area that for years has remained unchanged in the midst of an environment where the only constant is change.
Think about it, it is 3 times cheaper to retain and keep a customer than to get a new one.
