“Grain of Sand in Your Shoe” Collections Process

Author: Emily Maltby

Source: The Wall Street Journal, November 14, 2011

Everybody seems short on cash these days, but when one company pays a bill late, it often begins a domino effect of late payments.  The article below describes a method that I recommend to all my clients which I refer to as the “Grain in the Sand of Your Shoe” collections process.  I’ve seen it reduce outstanding payables by as much as 25%–if you don’t have a consistent process to collect payables, you won’t get your cash.

Call it a cash-crunch contagion.

One business owner falls behind on paying suppliers. Those business owners then fall behind on paying their own suppliers. And so the delinquencies spread.

The causes are all too familiar—sluggish consumer spending, tightened capital markets and overall economic uncertainty. And the consequences are afflicting countless businesses across the country.

Owners are finding it harder than ever to collect payments, making it difficult to manage their own debts. Many are torn between imposing tough terms on their customers, and letting them slide out of sympathy.

As hard as businesses are being squeezed now, the long-term effects could be more severe. Experts say the longer the problem persists, the harder it could be for owners to repair their credit, maintain strong business relationships and, ultimately, grow.

“It is a huge problem,” says Gerri Detweiler, co-founder of BusinessCreditSuccess.com, a credit-information website. “Many businesses are bare bones now and can’t cut expenses. They don’t have the lines of credit they used to have. They’re pushing those bills as long as possible.”

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JRI Consulting, LLC