Customers Rule

Anyone owning or running a company knows that the first rule of business is that customers rule. In other words, give the customer whatever they want so you can earn their business, right? So what happens when you develop that philosophy and it starts to cause your company harm? Abusive customers can cause company owners or managers serious heart burn.

Putting together a comprehensive customer service/support plan is a critical aspect in any business planning and development. It’s also critical to understand how/when a market is changing. Are the customers you serve today in the same environment they were 1, 3, 5 or 10 years ago? More than likely your answer is no. You don’t need to think very long or hard to know how the market has changed.

One of the most challenging aspects of meeting or exceeding customer service requirements is how your business supports their product/service requests. A critical part of this area is how customers take advantage of your ability to extend them credit after you’ve provided your product or service to them.

Extending credit in the world of business to business sales and service is generally a straight forward, well defined process, right? Oh, you say, maybe not? Your accounts receivable portfolio can be a mixed bag of customers. How you manage Accounts Receivable is going to play a critical role in the overall success of your business. You are trying to strike the right balance between excellent customer service, while not allowing some customers to take advantage of your well-intended practices.

Following are some suggestions as to how to best manage your Accounts Receivable Portfolio, provide excellent customer service and still gain the proper level of incoming payments from customers as you manage the Portfolio.

Know your customers, make sure you have a solid credit application process in place that will clearly define your customers’ ability to meet their obligations and not pose significant risk of loss. There’s a lot more to evaluating a customers’ ability to pay your business for its products and services than simply trying to verify a bank account and obtain some trade line references. In today’s world you have a number of resources available to get a clearer picture as to who your customers really are and what they can and cannot do. Using commercial credit reports, conducting internet searches and using online photo services such as Google Earth can help you better understand your customers.
Divide your Accounts Receivable Portfolio into 3 basic levels of credit risk: High, Moderate and Low. Know what portion of your Portfolio represents these 3 levels of risk.
Take a total company, team effort approach to maintaining excellent customer service and management of one of the largest company assets, Accounts Receivable. Your sales/marketing/customer service team needs to include a clearly defined effort as to how Accounts Receivable is properly managed. Although Accounts Receivable traditionally has been under the command and control of the Finance area of a company; it should also be an important responsibility of those that are part of Sales/Marketing/Customer Service areas. The best run companies integrate Sales, Credit Management and Accounts Receivable Management into one solid strategy.

PHONE: 800-964-1353
FAX: 877-643-8752
Email: tbucher@buchergroup.com

Always remember, the easiest, most cost effective sale is the repeat sale to an existing customer. So your knowledge and level of trust of existing customers need to be at a level that allows for the maximum amount outflow of product/services with the minimum of time/cost to ensure those products/services are paid for within a reasonable timeframe. Older, more well established companies where there have been long term relations with customers sometimes become the most problematic to manage. Over time, both the company providing the product/service and the customer become comfortable with the relationship. And over time the customer may have imposed on the supplier to grant extra time to pay for products/services. There is nothing wrong with helping a longtime customer through a short term tough spot; the secret is knowing when/if that tough spot turns into a long term crutch where the customer now expects to always get extended time to pay without really coming to a firm agreement with the supplier. A supplier that wants/needs to reverse this condition will need to take a lot of time, ingenuity, patience and a coordinated strategy to result in improving cash flow, reducing exposure and risk. Each customer will need its own action plan. These plans then need to be executed, monitored and benchmarked.
When opening a new customer account use a qualified credit application form that clearly communicates with the customer what you, the supplier, require; i.e. purchase orders, acceptable terms/conditions and, when needed, personal guaranty of payment from the principals. These are key elements to put into place BEFORE the first order ships. Also, one way to properly establish a positive, results oriented relationship with a new customer is to contact the new customer within a few days of delivering the first order/service and ask the following. Was the material/service provided as expected? Did the invoice properly represent what was shipped? Was the pricing, quantity and quality what the customer expected? Then finally ask the customer how payment will be processed; understand how the customer processes an invoice for payment and when payment should be expected.

The Customer Rules – but you can take a proactive role in setting the Rules!