Sigma Share~Baltimore May 2014
“The key to success in this business is getting paid and paying your taxes” -unknown
Credit Management Sigma Share~Baltimore May 2014
[email protected] www.Firestream.com
Introduction •
It takes about 120 transport loads to make up for 1 bad debt load.
•
Many of the companies we meet have no written OR technology enabled credit/collection policies and procedures.
•
•
The ultimate measure of credit & collection is “Days Sales Outstanding” or DSO. Do you know yours? Are you trying to drive it down? Your cost of capital may be higher than you think if you are a growing business… collecting more quickly is essential for this reason
•
Do you know what the financial gap is between your customer terms and your supplier terms?
•
Your bank’s confidence in your business is based on your credit and collection saavy.
•
Good credit and collections is about:
• •
Setting expectations with customers Watching customer behavior… CONSTANTLY (YOU Must automate)
The Why… Is it worth it??
[email protected] www.Firestream.com
Invoice Set expectations by NOT sending statements. Each of your receivables should stand on its own as an item (open item) and not a part of an overall balance (balance forward).
How Paid Your best bet and your most efficient , low cost means of getting paid is via EFT. Your back office should generate draft notices, upload your draft file and automatically post EFT credits to customer accounts.
Terms Always base your terms on delivery date! Ensure that you are aging based on product type!
Credit Amount Formulaic is ok, but complicated & relies on customer provided info. See next page……
Ideally your customer terms are equal to supplier terms!
Basic Policies Technology Enforced !
[email protected] www.Firestream.com
credit + amount : baseline policy 1. New Company (less than 2 years old) a) < $5,000/week of deliveries…. set $5,000 b) > $5,000/week of deliveries…. Prepay for 45 days… then lesser of $35,000 or sales expected every 10 days AND get a bank letter of credit sufficient to cover 50% or more of your exposure 2. Existing Company (2 years old or more)… credit of 2 weeks of deliveries and bank LOC “ Доверяй, но проверяй (doveryai, no proveryai)… trust but verify” -an old Russian proverb that Regan liked
Basic Policies Technology Enforced !
[email protected] www.Firestream.com
behavior + driven : “When you.. We… 1. Prompt Pay Discounts 2. Account on hold until corrected for late pay, NSF or missed promise to pay… credit rating downgraded for 1 year. 3 reductions and your fired. 3. Credit limit sensitivity based on quality of relationship.
Advanced Policies Technology Enforced !
[email protected] www.Firestream.com
#1 : get paid by EFT 1. Draft creation by your back office… no manual work 2. Draft notices automatically distributed by your back office. 3. Upload to bank and auto update of receipt.
Procedures Technology Enabled !
[email protected] www.Firestream.com
For Non-EFT : Leverage back office automation Pay within terms and stay under limit Manage credit limit and payment terms with equal importance!!
Know the following: 1. Every Morning who was supposed to pay yesterday and didn’t. Auto put on hold as appropriate. 2. In real time, who is getting close to or over their credit limit AND who NSF’d you.
- Use email / text to remind of approaching credit limit AND document in back office. After 2 days, then… - Make system documented collection call
- Loop sales people into the process with copies of emails and texts…. automatically
Procedures Technology Enabled !
[email protected] www.Firestream.com
thank you…. questions? www.firestream.com
Credit Management Sigma Share~Baltimore May 2014
[email protected] www.Firestream.com
Introduction •
It takes about 120 transport loads to make up for 1 bad debt load.
•
Many of the companies we meet have no written OR technology enabled credit/collection policies and procedures.
•
•
The ultimate measure of credit & collection is “Days Sales Outstanding” or DSO. Do you know yours? Are you trying to drive it down? Your cost of capital may be higher than you think if you are a growing business… collecting more quickly is essential for this reason
•
Do you know what the financial gap is between your customer terms and your supplier terms?
•
Your bank’s confidence in your business is based on your credit and collection saavy.
•
Good credit and collections is about:
• •
Setting expectations with customers Watching customer behavior… CONSTANTLY (YOU Must automate)
The Why… Is it worth it??
[email protected] www.Firestream.com
Invoice Set expectations by NOT sending statements. Each of your receivables should stand on its own as an item (open item) and not a part of an overall balance (balance forward).
How Paid Your best bet and your most efficient , low cost means of getting paid is via EFT. Your back office should generate draft notices, upload your draft file and automatically post EFT credits to customer accounts.
Terms Always base your terms on delivery date! Ensure that you are aging based on product type!
Credit Amount Formulaic is ok, but complicated & relies on customer provided info. See next page……
Ideally your customer terms are equal to supplier terms!
Basic Policies Technology Enforced !
[email protected] www.Firestream.com
credit + amount : baseline policy 1. New Company (less than 2 years old) a) < $5,000/week of deliveries…. set $5,000 b) > $5,000/week of deliveries…. Prepay for 45 days… then lesser of $35,000 or sales expected every 10 days AND get a bank letter of credit sufficient to cover 50% or more of your exposure 2. Existing Company (2 years old or more)… credit of 2 weeks of deliveries and bank LOC “ Доверяй, но проверяй (doveryai, no proveryai)… trust but verify” -an old Russian proverb that Regan liked
Basic Policies Technology Enforced !
[email protected] www.Firestream.com
behavior + driven : “When you.. We… 1. Prompt Pay Discounts 2. Account on hold until corrected for late pay, NSF or missed promise to pay… credit rating downgraded for 1 year. 3 reductions and your fired. 3. Credit limit sensitivity based on quality of relationship.
Advanced Policies Technology Enforced !
[email protected] www.Firestream.com
#1 : get paid by EFT 1. Draft creation by your back office… no manual work 2. Draft notices automatically distributed by your back office. 3. Upload to bank and auto update of receipt.
Procedures Technology Enabled !
[email protected] www.Firestream.com
For Non-EFT : Leverage back office automation Pay within terms and stay under limit Manage credit limit and payment terms with equal importance!!
Know the following: 1. Every Morning who was supposed to pay yesterday and didn’t. Auto put on hold as appropriate. 2. In real time, who is getting close to or over their credit limit AND who NSF’d you.
- Use email / text to remind of approaching credit limit AND document in back office. After 2 days, then… - Make system documented collection call
- Loop sales people into the process with copies of emails and texts…. automatically
Procedures Technology Enabled !
[email protected] www.Firestream.com
thank you…. questions? www.firestream.com
