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IMPROVING YOUR COMPANY’S CASH FLOW

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Page 1: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

IMPROVING YOUR COMPANY’S CASH FLOW

Page 2: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Billing & CollectionsBest Practices

byGene Rodriguez

Transworld Systems, Inc.

Page 3: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Gene Rodriguez

Senior Account Executive5 Years with Transworld Systems,Inc.

Phone: 727-432-5690Fax: 813-286-2587Email: [email protected]: www.web.transworldsystems.com/Tampa/

Address: Transworld Systems,Inc. 5601 Mariner St., Ste. 475 Tampa, FL 33609

Page 4: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Best Practices Start at the Sale

•Written Agreements•Payment Terms•Possible Penalties for Violations•Proof of Commitment

Page 5: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

What to include on an invoice?

• A clear invoice # and request it on check• A specific due date• Details including the date of service, the

case, time spent, copies provided along with corresponding rates

• Acceptable forms of payment• Your phone #• No 30, 60, 90 boxes

Page 6: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Start Early – Recover More We all know that the older an account gets, the harder it becomes to collect. But did you know that at

60–90 days past due accounts begin to depreciate at the accelerated rate of 1/2% per day? At 180 days past due funds have depreciated to the point where only 30% on average will ever be recovered.

0 30 60 90 120 150 180 210 240 270 300 330 365

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

10%

30%

74%

95%

A G E O F A C C O U N T S IN DAYS

Source: U.S. Department of Commerce study on depreciation of accounts held in-house

Critical Depreciation Period

1/2% per day

Page 7: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Follow Up Early

• Be the “Squeaky Wheel”• Written request for payment

including due date and acceptable payment types

• Remind and thank them for earlier commitment

• Attach copy of previous commitment

Page 8: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Top 10 Ways to Improve Collections

Businesses do not always get paid for the service or product they provide.

The following steps are critical to reduce this cash flow killing problem.

Page 9: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Rule 1Have a Defined Credit

Collection PolicyClearly state your terms of payment

in writing for every customer.

Top 10 Ways to Improve Collections

Page 10: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Establish WrittenInternal Collection

Procedures• Easier when training new employees• Demonstrates importance placed on

collections• Establishes performance

benchmarks• Review and update as needed• Keep it clear and simple

Page 11: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Defining a Collection Policy

• Define “past-due”• Define acceptable payment

arrangements• How many written notices?• How many phone calls?• How is returned mail handled?• Do you make personal visits?

Page 12: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Rule 2Invoice Promptly and Send

Statements RegularlyIf you don’t have a systematic billing

system, get one.

Top 10 Ways to Improve Collections

Page 13: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Rule 3Use “Address Service

Requested” Post Office will research addresses of

“mail skips” and for a small cost of seventy cents they will forward the mail and in return send you a post card with the most current address on file.

Top 10 Ways to Improve Collections

Page 14: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Rule 4Use Your Aging Report,

Not Your FeelingsBe diplomatic, but be persistent.

Tip: Use colored paper for past-due notices

Top 10 Ways to Improve Collections

Page 15: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Rule 5 Contact Overdue Accounts

More FrequentlyContact late accounts every 10-15

days.

Top 10 Ways to Improve Collections

Page 16: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Cash Flow Improvement

“Come on, I know you’re

in there, I can see your eye

through the peep-hole!

Page 17: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Rule 6Make Sure Your Staff Is Trained• Even experienced staff can become

jaded• Firm but courteous is the key • Staff must “sell” concept to clients

that they should pay what is owed

Top 10 Ways to Improve Collections

Page 18: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Collecting by Phone

• When to start calling• Goal: Payment in full with 1 call• Track days/times of calls• Getting past the gatekeeper• Set goals of # of calls• Mental Attitude – expect success• Ask for payment TODAY (credit cards)

Page 19: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Communicating by Phone

• Make a connection with Debtor• Actively listen for clues for motivation• Speak clearly and energetically• Have objective in mind• Know the next step – be prepared• “It’s my policy that…• Take good notes (just in case)

Page 20: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Positive vs. Negative Communications

• I know you expected quality work delivered on time…

• I know you have responsibilities as we all do…

• This will cost you more if I have to take further action…

• I don’t care about your problems…

Page 21: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

How to Ask For Money

Asking For Money is A 3-Step Process

Step One – SympathizeShow compassion, “I know how that happens sometimes”

This diffuses any possible anger and catches them off guard.

Page 22: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

How to Ask For Money

Asking For Money is A 3-Step Process

Step Two – Restate the Obligation

“Mr. Smith, your account was due on m/d/y.”

This should cause some guilt on their behalf as well as have them realize you are “right” in asking to be paid.

Page 23: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

How to Ask For MoneyDo Not Ask

•How much can you pay?

•When can you pay?

•Can you pay something?

Note: This gives control of the conversation to the debtor, enabling them to give unreasonable answers

Page 24: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

How to Ask For MoneyAsking For Money is A 3-Step

Process

Step Three – “How Much Are You Short?”

“Mr. Smith, of the $200 that is due, how much are you short?”

1. If can pay some now, then give finite time to pay balance.

2. If short whole amount, you are still in control of payment terms.

Page 25: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Rule 7Admit and Correct Any Mistakes On Your Part• Customers realize that “to err is

human”• They will appreciate prompt and

courteous action when an oversight is caught

• Beware: Do not try and cover up mistakes!

Top 10 Ways to Improve Collections

Page 26: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Rule 8Follow the Collection Laws in

Your State• No public advertising of the debt• No calling at odd hours, threats, etc

Top 10 Ways to Improve Collections

Page 27: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Cash Flow Improvement

“DON’T TELL ME YOU

FORGOT TO PAY THE

MARRIAGE BUREAU TOO!!

Page 28: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Rule 9Use a third party sooner

• After 90 days, in-house efforts are more expensive and less effective

• Third party demands motivate customers

Top 10 Ways to Improve Collections

Page 29: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Remember this slide?

0 30 60 90 120 150 180 210 240 270 300 330 365

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

10%

30%

74%

95%

A G E O F A C C O U N T S IN DAYS

Source: U.S. Department of Commerce study on depreciation of accounts held in-house

Critical Depreciation Period

1/2% per day

Page 30: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

When to Seek a 3rd Party• According to written policies/procedures• Broken promises – “check is in the mail”• Unable to reach by phone (voicemail, in

a meeting, answering service, etc.)• Disconnected Phone or Number

changed to unlisted• Missed Payments, Payments getting

smaller

Page 31: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

When to Seek a 3rd Party – cont’d

• Certified mail returned “Unclaimed”• Admission of inability to pay• Debtor says “You’ll get paid when I

get paid”• Bounced Check and no response• Disputed Balance, disputed quality

of service or product

Page 32: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

What to look for in a collection agency

• Licensed, bonded insured

• All terms in writing• References available• Reputable• Experienced in your

industry• Hold Harmless

Agreement• Performance

Guarantee

• Nationwide coverage• Pricing (flat fee vs.

percentage)• Status Reports• Personal account

representative• Soft or hard

collections at your direction

• Electronic account submission and updates

Page 33: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Rule 10Nobody Collects Every Account• Even with a good billing and

collection policy, a few accounts will never be collected

• A consistent collection process will diminish the number of slow and non pay accounts, and that’s a victory in itself!

Top 10 Ways to Improve Collections

Page 34: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Cash Flow Improvement“It may seem

we’re sinking

deeper into debt, but

really we’re just

experiencing a quarter of negative

growth.”

Page 35: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Collections:What’s Your Legal IQ?

True or False #1An account must be at least 90 days

past due before sending to collections.

FALSE

Page 36: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Collections:What’s Your Legal IQ?True or False #2

You must inform debtors before turning their account over to a

collection agency.

FALSE

Page 37: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Collections:What’s Your Legal IQ?

True or False #3You cannot speak to a debtor’s

spouse regarding the debt.

FALSE

Page 38: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Collections:What’s Your Legal IQ?True or False #4

As long as a debtor pays $1 per month, you cannot turn their account over to collections.

FALSE

Page 39: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Collections:What’s Your Legal IQ?

True or False #5If a check is marked “Payment In Full” you can simply scratch it out.

FALSE

Page 40: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Collections:What’s Your Legal IQ?True or False #6

Even if you never use a collection agency, you can threaten turning

the debtor over anyway.

FALSE

Page 41: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Cash Flow Improvement

Page 42: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc
Page 43: IMPROVING YOUR COMPANY’S CASH FLOW. Billing & Collections Best Practices by Gene Rodriguez Transworld Systems, Inc

Cash Flow Improvement

Loan

Manager