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An Effective AR Strategy Has Cash Flow Impact and Can Stimulate Your Business







It's a typical Monday morning, around 8:00 AM. The phone is ringing off the hook in the back office of a retail/wholesale supply business.

"Good morning, Tri-County business office," the young man answered pleasantly.

"Hello, this is Bessie Green, and I'm calling about this bill I received. It's marked past due."

"Yes ma'am, I can help you. What is the account number in the upper left corner?"

"Uh, let's see now. Let me get my glasses. Okay, it's 667-009."

"Thank you Mrs. Green. Actually, you don't owe anything. I see that this bill has been paid."

"Oh, well I thought so," she said emphatically, "I knew I had mailed it more than a week ago. I just wanted to be sure about it. Uh, what should I do with this past due bill then?"

"Well ma'am, do you have a fireplace?" the young man asked, quite happy that he had solved the issue.

"A what? A fireplace? Well, yes I have one. What does a fireplace have to do with this?" she asked, obviously puzzled.

"Well ma'am, you can just take that bill and wad it up and throw it in the fireplace," the young man said with a big smile.

The conversation above, modified for anonymity, actually took place several years ago. As one can imagine the outcome was not good. The elderly customer complained to the store owner that a rude young assistant had insulted her about a bill that she had paid quite a while ago. The young agent lost his job, and the store lost a customer for life. What started out as a simple customer relations transaction opportunity turned into a PR disaster for the store, and it didn't have to happen.

The Cash Flow Impact On Your Business

Accounts receivables management is both an art and a science. Both elements were applied poorly in the example above. On the artistic side, the young agent had a pleasant voice and conversational manner. But, he was clearly not trained, and he was not following a carefully scripted response flow chart. That was the major reason for the PR debacle.

From the scientific perspective, however, the call should have never taken place because that payment was actually received before the statement was even mailed. Poor posting procedures and insensitive customer contact policies allowed the incorrect statement to annoy the customer unnecessarily.

An effective accounts receivables strategy would have prevented all the issues above. That same strategy may even help generate more sales from existing customers, and potential referrals. Such results are quite possible, and it all starts at the point of purchase. Obviously, in the example, the store had an outdated revolving charge account system. Bank cards and retail store cards have replaced these at the retail customer level; however, it happens that this store, a hardware and farming supply store, also has a large commercial business in the surrounding rural areas and still maintains a billing and accounts receivables department to manage these accounts. It is possible that the same mistakes in the example above could be repeated and could result in a larger commercial loss for the store. Even more likely is that fact that the store's overall cash flow could be improved dramatically if the owners contracted with a professional "business" accounts receivables management company, instead of depending on local staff and outdated systems.

Experienced, trained agents with the latest receivables management technology and customer sensitive methods of contact would not allow irritating past due notices and unpredictable verbal communications. The prompt, business-like manner of these companies could actually elevate the commercial clients' views of their vendor, and thus help increase future business potential referrals. This will impact cash flow and stimulate your business, and it all starts at the point of purchase. Obviously, in the example, the store had an outdated revolving charge account system. Bank cards and retail store cards have replaced these at the retail customer level; however, it happens that this store, a hardware and farming supply store, also has a large commercial business in the surrounding rural areas and still maintains a billing and accounts receivables department to manage these accounts. It is possible that the same mistakes in the example above could be repeated and could result in a larger commercial loss for the store. Even more likely is that fact that the store's overall cash flow could be improved dramatically if the owners contracted with a professional "business" accounts receivables management company, instead of depending on local staff and outdated systems.

More companies are beginning to see that professional accounts receivables management is not just about the cash flow impact and decreasing costs, although those are the expected results. It can also be a clear example of a well-managed, customer oriented business to both existing and prospective customers alike.


About Author Michael S Fink :

If you would like more information on how to create an effective accounts receivable management strategy visit us at <a href="http://whohasmymoneyonline.com/" target="_blank">http://whohasmymoneyonline.com/</a> or call 800-576-4974 to schedule a FREE 30 minute coaching strategy meeting with me.
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Article Added on Thursday, May 22, 2014
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