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?