Magazine article Business Credit

Collections Forum Q&A

Magazine article Business Credit

Collections Forum Q&A

Article excerpt

Collections Q&A

Q Last month you wrote about the habitual slow-paying customer. Not only do I have to deal with the slow-paying customers, but the problem is compounded by the sales department which continues to extend credit to customers I consider to be "problem accounts" I find that the salespeople think in terms of volume and have a difficult time equating dollars with that volume. It frequently feels as though I am fighting a losing battle because no matter how much I collect, it doesn't put a dent in my aging when the sales department keeps adding to accounts that do not pay. How can I get the people in sales to open their eyes and cooperate with me?

- T.F., Jackson, MS

A Sales can be a tough job and the great sales people I know not only work hard at their job, but also cooperate with their respective accounts receivable departments. Not only does it take sales to make a company work, but it is also equally important to collect on the sale. Competent, successful sales people understand this concept and they are the ones who have longevity with a company. I have a great respect for competent salespeople. There is no question that, in many companies, working with the sales department can indeed be exhausting and add to the stress of your job.

Unfortunately, much of this has to do with company policy. It is amazing how many companies pay their sales representatives a commission for the sale before collection on the sale has been achieved. If the money is not collected, it can be several months before the commission is deducted from the salesperson's paycheck - and many times the salesperson is long gone at that point. With a policy like this, what incentive do salespeople have to help you collect your receivables?

Your job becomes even more frustrating when you continue to chip away at the aging, yet every month when your new aging comes out, the numbers have increased. This is when many accounts receivable people are confronted by their boss wanting to know what they are doing. How can they be doing their job efficiently when the aging keeps going up?

If you work for a company where salespeople are able to add to delinquent accounts, I recommend you start preparing a monthly report for your supervisor. I created my own "Frischer Report" when I began working in collections 16 years ago. The company I worked for at the time had 10 partners and the aging was separated by each partner. Once a month, I would meet with each partner to go over their particular aging. When we would get to a client where I felt the receivable was getting out of hand, inevitably I was told, "don't worry about that one Carol, I have it under control. It's only $5,000." By the time I got through all 10 partners, there was close to $100,000 that I was told not to worry about. Many of these receivables were "personal" and I was instructed not to become involved in the collection. In the meantime, every month the partners continued to add to the receivable of selective clients with no sign of money coming in on their accounts. To protect my job and myself, I started preparing a monthly "Frischer Report" to all the partners that showed the cumulative effect of all the accounts I was told not to worry about. It also contained a memo stating reasons why I felt that they should stop work on these particular accounts. Collectively, the partners could then decide whether or not to stop working on an account. Because they owned the company, this was their decision to make, not mine. …

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