A New Year and a new challenge

It is a new year, gratefully for the many who found 2009 complete rubbish. So I ask myself, what things to focus on at the start of this year. Well, my focus is on business and making money. We are generally either out of, or coming out of, technical recessions and I can finally say that we are at the launch pad for the next 3-5 year growth phase. However…not so fast. Depending on your sector it could take 2 years or so for growth to approach normal (3-4% per annum say) thus businesses will need to work much more strategically to get ahead of this curve. So the focus must be on growing enterprises through the only real way that this can be achieved: effective marketing resulting in increased sales.

So its back to sales and marketing is it. Okay, where to start? In my start your own business courses I talk to participants about the sales and marketing tree. What is this I hear you ask? Well, it is a tool I developed to help people connect the marketing and sales. In my experience people can understand how to develop their markets and niches generally. They also get an understanding of the fundamentals of selling but it takes some time for people unaccustomed to sales to connect these two things up coherently. So over the next couple of posts I will try to ask a series of questions which, if you can answer them coherently, will allow you to see how strategic marketing can lead to strategic sales and business growth.

P.s. – one comment. While you are looking for new business don’t make the fundamental mistake of losing your existing customers. New business is great but it is always easier to build business from existing business relationships that constantly building new ones. So we shall now focus on asking a series of questions to help you focus on identifying new customers.

P.p.s – Have a great 2010.

T’is the season to be…planning

Christmas is a great time for most people. Unless you work in retail, the period between Christmas day and New Year it is also one of the quietest periods of time in the business calendar. So when you have had your festive cheer and done you’re shopping, the few days after Christmas is a great time to clear your head and assess your situation. Ask yourself questions like how did your year go? What worked well and what didn’t? What opportunities exist with your current clients? What goals and objectives do you want to set for the next business period?

Remember to do this planning when you have cleared your head and are in a relaxed and reflective frame of mind. When you are chasing business or working whilst trying to think about setting up a new business, the day-to-day activities tend to take over and you are left firefighting rather than working a thought out plan.

In either case have a great Christmas, we have all deserved it having survived 2009. The objective of planning is to make 2010 a much better year than this one…bring it on!

Happy Christmas or as we say in the Irish language ‘Nollaig shóna duit’

Getting Paid (Part 4)

What can you do if you simply cannot get paid by someone who owes you money? In the first instance, learn from your mistake. Review your systems and update the, find out what went wrong and make sure it doesn’t happen again. The other options are usually far less successful. You can go the legal route but remember if they don’t have the money or the amount is very small then the reward may not be worth it. Solicitor’s letters cost you money and after a while mean nothing. As a rule the first solicitor’s letter a person receives gets their attention. However, once you have received a few solicitor’s letters the impact dwindles and people take far less attention to them. It also may cost to take the person to court and you never really know how a judge will rule in these matters. You should do a cost/benefit analysis of taking the legal route as it doesn’t always generate a great deal of money for you, but it will for the solicitors.

Similarly, debt collectors also cost money and they can do nothing more in reality than you can do yourself. If you are operating on a small margin then you are not likely to make much money through debt collectors.

In many countries you can claim back VAT, if registered, on bad debts and you can then write off the remainder as a bad debt for tax purposes. If the debt is current then you can issue an internal credit note to make your accounts look better, but you still will not get paid. This should not be done often as it looks bad on your balance sheet after a while.

So to conclude:
• Good debt control = good administration = good cash flow
• Tight administration leads to lower levels of late payments
• ‘He who shouts loudest’ gets paid. Those who are first in the queue get paid where those who are second get little.
• Paperwork and procedures are the key ingredients of a good payment system
• Check out new clients
• If they get behind, don’t do further business with them
• And remember, its your job to get paid your money

Getting Paid (Part 3)

The missing link in most new businesses administration system is the failure to draw up comprehensive ‘Terms and conditions of sale’. These are the terms under which the customer agrees to buy and pay for the good or service you are providing them. Regretfully, many businesses simply do not write up terms and conditions of sale and the customers are given the wriggle room to enable late payment.

Your terms and conditions of sale should be clearly stated:
• In contracts
• On the back of delivery dockets
• On the back of invoices
• On the back of statements
• And importantly, make sure it is legible and use same font, font colour & size as you use in the rest of your documentation.

The terms and conditions of sale should state:
• Who has authority to sign for goods/services
• What is the credit limit if any
• When exactly is payment required, either after the delivery of goods or issue of invoice
• The consequences of late payment – interest payable on late payments, repossession of goods, denial of support etc.
• Will there be exchange of goods or credit notes
• What are the terms with regard to return of goods/credit notes or repayment
• It should also note that the customer’s statutory rights are not affected by the terms and conditions.

When you are drawing up your terms and conditions of sale you can also draw up your payment procedures internally. For example, when you are doing business with clients:
• How do you get the client to accept of terms and conditions of sale in contracts
• Have delivery dockets (with acceptance of T&C on back) and make the person receiving the goods sign and print their name. This should be a carbon duplicate with the customer getting the top copy and you keeping the bottom copy.
• Immediately send invoice when goods are delivered
• At end of month send statement
• With regular customers send statement – even if zero
• At end of credit term send letter of overdue account (with copy of delivery docket, invoice and statement)
• Follow up with phone calls
• If over a month overdue – personal call and do no further business until late payments are cleared.

With new clients
• Do credit checks on potential new customers
• Get them to Sign a contract or terms and conditions acceptance
• Cash up front initially
• Credit terms are earned by new customers at specific milestones
• They must prove their reliability
• If they don’t pay early – do not do further business with them
• There are more fish in the sea

Getting Paid (Part 2)

There are many reasons why people are late paying in business.
• They may just be disorganised. Unfortunately, many self-employed persons are not good with their administration because they set up their business as they have good skills in a specific sector but may not have the necessary business, selling or management skills. Simple lack of organisation is a key reason why many people are late payers.
• Another key reason for late payment is that you have not met the customer’s financial system requirements. This is particularly common when dealing with larger companies who have formalised administration systems. The customer will need specific paperwork that a smaller business may not produce. An important factor here is to understand that many businesses will now only pay on receipt of a monthly statement. Thus, a small business person will send in their invoices and wonder why they are not being paid, whilst the administration department of the customer is holding the invoices until they are sent a statement. You need to know your customers requirements.
• Unfortunately, a small percentage of people are acting with fraudulent intent. These are conmen (and unfortunately conwomen) and there is lilt you can do once they owe you money. The key is to ensure that you don’t do business with them in the first instance.
• In the current financial circumstances many businesses are forced to engage in a policy of not paying on time. In a situation where businesses cannot get overdrafts, extensions on overdrafts or other short-term finance, many businesses are being forced to hold on to as much cash as possible. Thus, putting off payment is a strategy that is being used. In this case you will probably get paid but you will have to wait.
• Finally, the customer may simply not have the money. There is a limit to what you can do here but there are 2 factors you should be looking out for. First, customers who owe you money and are keeping in regular contact are showing good faith. If you have to chase up people then this is a bad sign. Second, people who are paying in bits and pieces are showing good faith but those who are not are a serious concern.

The key to getting paid is all about administration. Making sure that you send out your invoices, statements, and follow up calls religiously is the primary method of ensuring that late payments are limited. Specifically, you need to be making time very week to do the following
• Update purchase and expenditure ledgers/books
• Send out invoices (immediately)
• Send out statements (monthly)
• Send out letters on overdue accounts
• Bank reconciliation
• Bank lodgement record

These are the key pieces of administration and information necessary to know:
• Who owes you money
• How much do they owe you
• How long overdue is the payment
• When your systems are properly set up, you know what actions to take and when

Armed with this information and proper systems, you can seriously limit the number of people who owe you, how much they owe you money and how long they owe you. Good administration and good cash flow are two sides of the one coin.