Our society started this March with hopes of a mild spring, and the possibility of an early start to our gardens, outdoor activities, and we all were looking forward to baseball.

WHAM!

A virus came upon us, wiping away certainty and planted disrepair into our lives.   For those of us who own a business, we have receivables still- some both due and past due since before the crisis.  So, what do we do with those receivables? 

Here are some tips on how to stay in touch with your customers who may or may not also be struggling:

  1. Be Empathetic.   This is probably your best defense against charge offs at the end of the year.   Pick up the phone and call like you’re calling a friend.    Make sure your customer is OK and ask how this has affected their lives and business.   Express some understanding and share a story about how your business is also working to get through this.   State that you want to help, and that you are willing to work with them if they need help.  
  2. Be Prepared.  Stay in front of your receivables by developing an aging report.   Filter your receivables by 15, 30, 60, 90, 120, and 150 days.   Manage to a DSO (Days Sales Outstanding) target.  Stick with the easier conversations first by calling new customers who recently bought.  Then move on to the folks you’ve been contacting for weeks, followed by those who have easier problems to solve, like sales tax issues, freight short payments, or maybe a sales dispute.  
  3. Be Human.  This goes along with #1 above but said differently be a human when it comes to collections practices.   If sending batch collections letters is a standard practice (which it ought to be) then follow up your batch mailing with a phone call.   Personally, I pay the people who are top of mind, and if you want to be paid after this is over (and maybe even now) then being a robot likely won’t get you there.
  4. Be Flexible.  At the end of the day, your customer still owes you money and you have to ask for it.  If you historically ask for the entire amount due, be flexible and ask if the customer can afford payments broken up over 3, 6, or 12 months.   This will lessen the cash flow burden for both of you, and keep at least some money coming in the door.   Don’t run right to this option- typically people will take no interest payments over paying in full if given the option.   Use this tool only if your customer presents a payment objection.   No one planned for this to happen, but a little flexibility will help smooth things out over time. 

Cash flow is going to be an issue for many of us as we navigate the next few months (if not years).    Staying in contact with your customers and reassuring them that you are here for them will go a long way, and may make the difference between you getting paid this month, next month, or never.   Your ability to use empathy, flexibility, and preparedness will set you apart from the countless other vendors asking for money at the same time you are.

For questions, tips, or help with collecting money in a national crisis, please reach out to anyone on our team.  

Rob Simon

rsimon@sharpcfo.biz

Beth Sidley

beth@sharpcfo.biz

Rich Hurey

rich@sharpcfo.biz

Lou Garcia

lou@sharpcfo.biz

Jim Gray

jim@jpgadvisors.com

Ryan Dietrich

ryan@sharpcfo.biz

Best Wishes and Stay Safe,

The Sharp CFO Team


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