This weeks business update comes from Abe WalkingBear Sanchez, a business expert based in Colorado.  Check out his website at: www.armg-usa.com

Current Credit Customers Keep Buying and Buying and Buying

Miami
The four day national business conference featured about 40 business speakers. One of the speakers was a sales management expert; I was speaking on B2B credit management.

I was telling the "Sales Management" speaker that as a corporate credit manager I’d print out a list for each sales person of their past-due credit customers. I’d might as well have called it the "Avoid" list.

"Don’t sales guys understand that the most profitable sale is the repeat? That it costs 8 to 14 times as much to find and sell new customers as it does to keep and sell to existing customers?", I asked.

"Unlike you, Abe, most salespeople like people and want to be liked in return. They avoid anything they think of as being confrontational.", he said. It’s a good thing for the smart aleck that I haven’t hit anyone since I quit drinking.

Hold or Hide
Believe something and it’s true, at least to you. In business there still exists an out of date and misguided belief that past due credit customers are bad; that past due credit customers can’t / shouldn’t buy. This "risk management" view of credit and A/R management results in credit managers spending much of their time releasing orders from the "credit hold / do not sell" list, and leads to salespeople crossing streets to avoid an oncoming past due customer.

The only credit customers that should be placed on "credit hold" are those few who for whatever reason can’t pay or who are trying to avoid paying. The vast majority of past due customers are good for the money and will pay. There are good reasons why most past dues don’t pay within terms.

Past due customers not only represent potential lost sales, they also represent an opportunity to elevate customer service levels. Listen to past due customers they’ll also tell you how to improve on your business processes.

Why Don’t They Pay When Due?
Many credit customers become past due because they’re disorganized or lazy about their A/P function. Some are playing games with paying vendors and suppliers; mistakenly thinking that practicing cash management (using vendors/suppliers as a form of short term financing and not paying late charges) is a good thing. Many more past due customers don’t pay because something is wrong.

There are also customers who don’t have the ability to pay when due, but can and will pay in the near future. A small percentage of customers can’t pay and have no idea when they will be able to pay. These are prime candidates for a bankruptcy filing. The smallest percentage of past due customers are those who are trying to avoid payment altogether; the best thing to do with these "avoiders" is to write them off and assign them to an enforcer; a collection agent or attorney.

The reason for contacting past due customers is not to collect, that what the enforcers do, but to "complete the sale." The goals being to keep credit customers current and buying, and to identify and control the small percent that represents a potential for loss.

Four Steps in Sales/Completing the Sale
The same 4 major steps are found in both sales and in completing the sale (past due A/R management).

Step One: Contact the Decision Maker
In sales the decision maker is the person who can say "yes." In past due A/R management it’s the person who can tell you when you’ll be paid and just as importantly why you weren’t paid when due.

The best opening in a completion of the sale call is "Our records show invoice number so and so, dated __day of __ for ___dollars still being open, can you please help me with this matter? Shut up and listen.

Step Two: Determine Need / Desire / Type
In sales we ask questions about the customer’s needs or desire so that we know their "hot button." In completion of the sale we ask questions about why the customer hasn’t paid so that we can determine the account type.

Step Three: Push the Hot Button
In sales we want to point out how our product/service meets or exceeds the customer’s expectation, their hot button. In completion of the sale we want to resolve why the account is delinquent.

If a customer is disorganized or lazy we become a friendly squeaky wheel.
If something’s gone wrong, we fix it.
If a customer has a short term cash flow problem, we work with them and encourage them and continue buying from us.
If a customer has no idea when they’ll be able to pay we need to cut off further credit sales and move at once to improve our position on the account (liens, notes, personal guarantees, returns, barters).
If a customer is uncooperative, lies and breaks payment or other arrangements we need to cut off further credit sales and then get them out to a collector.

Step Four: Close and Follow Up
In both sales and completion of the sale, we want to repeat the understanding and then calendar the account for follow up.

Telemarketing to a Captive Audience
One of the best credit managers I’ve ever met was a woman in Evergreen, CO. The first thing you noticed in her office was a bulletin board covered with pictures of children. There were black kids, white kids, Asian and brown children. They were her customers’ children.

"I love my job" she said. "I get to come to work and call my friends all around the country on my employer’s long distance service." By coincidence all her friends worked for her employer’s customers in the A/P department.

Calling past due customers can be enjoyable, if you make it so.
Early and cheerful contact combined with fixing things that go wrong, and the identification of potential losses leads to reduced losses, better cash flow, more repeat sales and higher customer service levels and customer retention.

The Author
Abe WalkingBear Sanchez is an International Speaker / Trainer on the subjects of Profit Centered Credit / Sales and bottom line enhancement. A hard hitting and fast paced speaker, Abe brings life and energy to a critical business function whose true potential has yet to be realized by most businesses.

TEC (The Executive Committee), "Inc." Magazine Annual Business Conference, CU (Denver), CSU (Ft. Collins), Texas A&M, NACM, IDA, AWCI, ARWI, PEI, BCFM, RAB, STAFDA, WIMA, ISD, Pet Industry Distributors Assn., Rain Bird, American Lock, Southern Wholesalers Assn., IBM, Touchstone/2000 Software are but a few of the groups, schools, companies and associations for whom Abe has conducted programs.

Abe can be reached through:
A/R Management Group, Inc.
P.O. Box 457
Canon City, CO 81215
(719) 276-0595
e-mail: Abe@armg-usa.com 
website: www.armg-usa.com  

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