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It’s Your Money — Go Get It


12/10/2009

An automotive aftermarket parts store's success is linked directly to how you determine your customer’s creditworthiness and how your accounts pay the credit which you have extended.
 

By Ron Dahlhaus
General Parts Group LLC,  New Jersey


If you are like every other jobbing store across America, each day your phone rings for business. Each day, you answer politely (hopefully). Each day, you look up the part requested from that phone call and quote the price for the desired part. Usually, after a brief conversation about price, availability, or time to deliver the part, you get the sale.

Sometimes, you even have to “run” to a warehouse to pick up that requested part. Finally, the part is invoiced and delivered and a signed ticket comes back. That signature states the person signing for the part is responsible for paying for the item. So much work, so much labor, so much expense — just to send a part to your customer. But is this a sale? Can we pay our bills with this signed invoice? Does payroll get deducted from the invoice like a tax deduction? The answer of course is no to all of the above!

With so many stores struggling with the rise in expenses, the rise in required inventory dollars and the lack of sales, many are quick to take any signed invoice as a way to pay the bills. Not so fast! The receipt for disaster is two thirds written if not for a few important steps.

As we all know, our credit markets have shrunk to an almost non-existent state. Borrowing used to be as easy as a handshake. Borrowing today has you putting up everything from inventory, to fixtures, to equipment and even your house. It is not friendly out in the real world of banking yet we give credit like it was giving out candy. Under these circumstances, what does your company do? How do you open a new account? Having 30 years of collection experience, all learned from on-the-job training, has me lending the following advise.

Make sure that your company has a well-written credit application, with personal guarantees. Make sure that your company has a well-written credit policy to handle every event and every type of payment requirement. From the Cash-Only Customer, the COD customer, the Pay at End of Day customer, the Weekly Customer and of course, the Monthly customer, you need a credit package for every situation. When does the billing cycle start? When does it end? When is payment due by? Is there a discount for prompt payment? What happens if no payment comes? After how long of no payment does the court action begin? Do you have any idea on how to implement court action?

Those last questions and the explicit answers are the telling tales of how well your business will survive as your credit policy is put into action. Clearly defined communication needs to be stated to your customer alerting them to your policies. Credit and Collection is a core fundamental process for obtaining success in business. Your business success is linked directly to how you determine your customer’s creditworthiness and how your accounts pay the credit which you have extended. To ensure your success you need to have a clearly written Credit and Collection Policy, and the ability to enforce it.

Make sure that each counterpro and manager is aware of the policies. Make sure that your “collection” person is on top of your collections from the first sale to the first attempt of collection. Not enforcing your policies and not taking the lead on collections is an easy way to lose your customers and your accounts receivable. Too many times, we think twice or three times about asking for our money.

Too many times, due to that neglect, the customer digs themselves into a hole that is far to deep to get out of. We all know what happens next. Your customer, once the model account, cannot pay, so they leave for a fresh start with another parts store, and you’re left hoping and waiting, all the time your customer is ringing up sale after sale at the competition.

A proactive approach with extensive communication with your customer is the best way to keep your customers and keep them buying and paying. This, my friends is a sure-fire way to succeed and build your business. After all, who’s money is it? Yet another question: who’s customer is it now?

  Previous Comments
avatar   will   star   12/16/2009   10:33 AM

MOST SHOP OWNERS ARE GOOD ABOUT THEIR PAYMENTS. I UNDERSTAND UNFORSSEN ISSUES, LIKE SURGERY AND PHYSICAL THERAPY( HAPPENED TO ONE OF MY SHOP OWNERS). YOU PROBABLY SHOULD MENTION THE DISHONEST EMPLOYEES THAT SEEM TO POP UP. OR THE PARTS GUY THAT'S STRAPPED FOR CASH AND LETS TEMPTATION GET HIM DOING THE WRONG THING. THESE ARE PROBLEMS THAT WE SEEM TO FACE ALSO



avatar   Wedge Antilles   star   12/14/2009   7:10 PM

Isn't it interesting that business continues to give out credit like candy to each other, but if a private individual needs credit they are told to **** themselves.















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