INSIGHTS & JOY

A business newsletter with Pizzazz!

"We help leaders become better marketers
using a holistic business approach!"

April - May 2008

Observe Memorial Day, May 26

In too many cases, a firm's collection system may be improvised and inconsistent where nobody is directly responsible and there are no written policy guidelines. Today would be an excellent time to review your credit and collection system in detail. You want to ensure that when your customer's accounts payable clerk sits with a tall pile of bills and a short amount of funds, your invoice gets moved to the top of the stack. This issue contains some helpful points to ponder regarding your credit and collection procedures.

NTX Private Business League. The League's objective is to link business owners who need professional services from time to time with a select group of experienced professionals who provide those services. Business owners gain impartial outside advice on their most pressing issues and they have access to the full array of professional services when, and if needed. I will update you in future letters as the NTX Private Business League gains traction. Contact me if you would like more information about the League.

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IN THIS ISSUE

It's not a sale until you receive payment!

Marketing Facets - The Market Focused Guide to Company Analysis

Smiles make the day!

$ Million Marketing Tips

Amazing Facts!

It's not a sale until you receive payment!

When business activity slows, collection of accounts receivable often slow down too. A company with thirty day terms suddenly find that some of their good customers have substantial balances in the 30 day and 60 day past due columns. Delinquent payments quickly absorb the company's cash, making it difficult to properly manage the business.

Those who have 'trained' customers to pay promptly have the advantage because they can take immediate steps to bring accounts back into the current column. Customers are used to paying on time, so they are not surprised when they get a call about the past due condition. Conversely, when you have been lax and overly forgiving in the past, you are likely to be the last supplier paid!

In too many cases, a firm's collection system may be improvised and inconsistent where nobody is directly responsible and there are no written policy guidelines. Today would be an excellent time to review your credit and collection system in detail. You want to ensure that when your customer's accounts payable clerk sits with a tall pile of bills and a short amount of funds, your invoice gets moved to the top of the stack.

How do you get paid before some others?

Do not hesitate to make a little noise. It's the old adage, "The squeaky wheel gets the grease." If you are persistent and determined to be paid, good customers will respect your sound business practice and see that you are satisfied, perhaps delaying payment to those who are willing to sit and wait for their money.
Establish a workable system and insist that it be followed. Nobody likes to call and ask for payment, so unless you make a specific person responsible for doing so, calls are likely to be postponed...forever. Set up procedures so the caller will have written guidelines and limits on what the person can accept. The procedure needs to recognize the importance of maintaining a positive relationship with customers so sales do not suffer unnecessarily. In effect, you want your credit function to work with customers to keep them in an "open to buy" status by paying promptly. The credit and collection policy must be effective without being Draconian, and it must have the backing of top management. You are working against the clock in many cases, trying to get your money before the customer's situation worsens and others get paid before you can collect what is owed to your company.
Here is one example of a simple and positive procedure:
After 30 days, send a second statement with a polite, yet firm note asking for prompt payment of the past due amount. You might hint that the previous statement or invoice must have been misplaced to help the customer save face.
After 45 to 60 days, it is time for a telephone call. By this time it is clear that your customer is having difficulty paying in full, on time. Your caller should have the authority to work with your customer's payables person or manager to establish a payment schedule that will clear the past due balance in a reasonable time. For large past due amounts from otherwise good customers, you may want to convert the past due open account balance to a separate interest bearing installment note with a specific payment schedule. The note is strong acknowledgement of the debt and provides interest income to you on the outstanding balance. Because the old balance is no longer shown as past due, the customer remains "open to buy" so long as his note and open account stay current. It is a win-win situation that retains the customer's business and goodwill.
If previous efforts fail, do not wait more than another thirty days before bringing in your third party, an attorney or collection agency. Often, a demand letter from an attorney or collection agency will finally get the customer's attention and spur payment, where another letter from your company may continue to be ignored. The longer a balance goes unpaid, the less likely it will ever be paid. Reputable studies indicate that after three months 74% are collectible; after six months only 58% are paid; and after twelve months a meager 27% ever get collected!
Avoid the fear factor. Salespeople worry too much about offending customers by asking a third party to attempt collection of a seriously past due account. If you have made multiple attempts to get your money, the customer will not be shocked when contacted by an attorney or agency. Qualified agents understand the need for tact and they are professionals at obtaining payment where you have been unsuccessful. The Federal Fair Debt Collection Practices Act of 1978 banned the abusive practices of earlier times when dealing with consumers. Although the law does not apply to businesses, the collections industry is much more effective and sophisticated now. You can get more information about effective collection policies from the American Commercial Collectors Association at (732) 842-5200.
One final thought. Make sure that your sales commission program provides for the charge-back of previously paid commissions on business turned over to a third party for collection. It is a mistake to make an incentive payment to a sales person, then pay a substantial additional fee to an agent to finally gain a past due payment. Consider writing off the sale, along with charge-back of any commission paid, at the time the account is turned over for collection. Recoveries of seriously past due amounts will be far less than the original amount and the net recovery rightly belongs to the company as other income or as an offset to bad debt write-offs.

Marketing Facets - The Market-focused Guide to Company Analysis

Should a salesperson's birth date be an important fact for a company acquirer to know? Could extended product warranties create a competitive advantage? How does the company forecast sales? What are the backgrounds and capabilities of the firm's key managers? Answers to these and a vast array of other in-depth questions receive attention in Marketing Facets.

Marketing Facets is a practical resource for those involved in determining the current health of a company and gauging its future prospects. Marketing Facets is a 103-page guidebook, and a supplement to other evaluation procedures and information normally gathered during a thorough due diligence or business valuation process. The workbook takes a holistic approach, assembling facts and management assumptions in key areas to help the analyst form and support conclusions.

Marketing Facets is a valuable resource to private investment fund managers, individual investors, venture capital specialists, investment banks, and valuation specialists. Marketing Facets is also a guide for C-level executives who wish to perform their own company analysis as part of normal business planning, or in advance of efforts to refinance, acquire or divest.

Marketing Facets is available in electronic form via the Internet, on CD/ROM, or in print with a ring binder.
> Electronic in MS Word .doc or Adobe .pdf format via the Internet @ $79.95
> CD/ROM format @ $85.95 including U.S. shipping and handling
> Ring binder version and CD/ROM combo @ $99.95 including U.S. shipping and handling

Consulting is also available. Please contact me for additional information.
Telephone: 972.931.7993 Fax 972.931.0542 rpmorgan@morganmarketingsolutions.com.

Smiles make the day!
When in debt...

Many a business owner is an active member of the debt set!

The reason that business conditions are so unsettled is because so many accounts are.

Every year, around April 15, Americans have a rendezvous with debt.

Things bought on convenient terms often fall due at inconvenient times!

Some businesses use one half of their ingenuity to get into debt and the other half to avoid paying for it.

What you don't owe won't hurt you.

Many who are quick to run into debt find it takes a long time to crawl out.

My dentist claims that the best collector of old dental bills is a new toothache!

One business owner crowed, "I started out with $5000 of borrowed money. Now, I owe $5 million...I must be successful!"

$ Million Marketing Tips

TIP: If nobody remarks about your price, it is probably too low. "Setting your price is like setting a screw. A little resistance is a good sign." Harry Beckwith in Selling the Invisible

TIP: Give your products and services distinctive names. Brand names help customers become more familiar with you and your offering. That's a great start toward improved marketing and easier selling!

Amazing Facts!

1. The most destructive disease in human history has been malaria.

2. The Bayer Aspirin Company trademarked the brand name Heroin in 1898.

3. Chicago tows more than 55,000 junk cars to wrecking yards each year.

4. Americans consumed 15,000 tons of snack food during Super Bowl XXXVI.

5. The Caribbean island of St. Barts is named for Bartholomeo Columbus, Christopher's brother.

6. When the groundhog predicts the start of spring, he's wrong 72% of the time.

7. Australia is drifting northward at a rate of 2.25 inches per year. "Continental warming?"

8. One U.S. state has a royal palace. Hawaii is home to Iolani Palace.

P.S. Ninety-five percent of our engagements originate as a referral from helpful people like you! If you know someone who:

> Wants to develop a more productive marketing program, or

> Needs help building and implementing an effective operational business plan, or
> Wants to exit a business or acquire another company,

I would appreciate the opportunity to discuss the situation with you.

Our ideal client is a business owner or CEO between 30 and 60+ years old. Usually with a financial, engineering, or production background. Who is often impatient, and interested in improving company performance. Comes alive when you ask, "How's business?" He, or she, is practical but also enjoys the finer things in life. So, you may see my ideal client driving a Lexus, BMW, or SUV to Neiman Marcus...and to Sam's Club. Who do you know that fits this description?

A client speaks: "You have been of significant help in two of my businesses in the past and I will continue to call on you in the future." Joel Williams III, Investor

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Richard P. Morgan CMC
Morgan Marketing Solutions, Inc.
Two Galleria Tower, Suite 10008
13455 Noel Road, Dallas, TX 75240-6620

Telephone 972.931.7993 fax 972.931.0542
email rpmorgan@morganmarketingsolutions.com
www.morganmarketingsolutions.com

Author, Marketing Facets - The Market-focused Guide to Company Analysis

"We help leaders become better marketers using a holistic business approach!"