Cash flow is KING. Unfortunately, businesses complain that maintaining a healthy cash flow level is their greatest challenge to profitability. Getting customers to pay on time is one of the largest contributing factors for maintaining profitable cash flow. Companies which sell products on credit, rent-to-own, or with ’12 months no interest’ type policies really own two businesses. The first is selling the products and the second is in collections. Many companies add a credit arm to their business to increase volume. However, getting customers to pay on time can become a huge drain on profitability. According to a study on payment practices by Atradius:
93% of companies have customers who are behind in making payments
47% of credit sales are paid late
Calculating your accounts receivable turnover rate can be an eye opening experience. In fact, companies write off an average of 1.5% of their receivables as bad debt. Let me put this in round numbers. If a company is doing approximately $50M, they are loosing around $750K yearly! Also, the company may have additional expenses if it has to acquire bank loans to protect working capital.
Improve accounts receivable by up to 79%!
First of all, accomplishing this type of increase requires managers and owners to admit that a solid business is a direct result of cultivating loyal, repeat clients who provide quality referrals. In contrast, debt collection breeds ill will and often ends in unresolved conflict. Therefore, customer relations can be damaged. If an impasse occurs, not only revenue from past purchases is lost, but also proceeds from future purchases. Therefore, a solid credit collection strategy involves more than just employing the latest technologies. Software does little toward maintaining good customer relations with late paying customers. Hence, maintaining good customer relations during the collections process requires training in conflict resolution, listening, and communication skills.
If your company is looking to:
- Develop and maintain good customer relations with customers that seem to be failing
- Shorten the time to recovering the outstanding debts
- Peacefully resolve payment disputes
- Get paid in cash rather than with empty promises
- Lower staff turnover
- Reduce no-pays
Consider the following solutions.
1. Use a consultative rather than transactional approach to collections
Unfortunately, many accounts receivable departments function in a transactional manner. They have a ‘get their money and run’ mentality. Therefore, it’s more about collecting what is owed now and less about securing timely future payments. In addition, a transactional approach locks you into hounding the same customers over and over, this month, next month and all the months to come. This wastes time. Furthermore, it does little to build a positive connection with the customer.
There are many reasons why customers may not pay a bill
In contrast, using a consultative approach to collections can have a positive impact on your bottom line. In fact, I have created a proven system called ‘Consultative Collections™’ which increases collections by as much as 79%. It is a method to reduce conflict, ease stress, retain clients, and most importantly, recover failed accounts. The Consultative Collections™ System involves skill based training in people and communication skills. In addition, it encompasses training in listening skills and conflict resolution. There are many reasons why consumers may not pay a bill. Many debt recovery and accounts receivable management agencies don’t grasp the importance of recognizing communication and decision making styles or how to defuse conflict. Our process equips your staff to build bridges of understanding and mutual respect to increase your number of clients who are current.
2. Focus on helping rather than harassing your customer
Attitude is everything. Projecting the attitude of helping your client goes a long way toward easing tension during the call. Consequently, skillful listening is a key element in this process. Have you provided training for your team on listening skills? Listening is a prerequisite skill necessary for increasing conversions. Create scripting that reflects you are interested in doing what is best for the customer. Furthermore, carefully constructed value propositions, focusing on client benefits, build bridges for developing rapport. Likewise, these approaches will expedite maintaining client engagement.
3. Equip you team with conflict resolution and communication skills
Finally, powerful, effective individuals understand that communication and people skills are the cornerstones to success in business. Unfortunately, as our world becomes more technology focused, these essential skills are being ignored. This results in many companies being confused as to why they’re struggling to obtain and secure more business. These skills are embodied within Rapport Mastery™.
Rapport is the deepest relationship that can be obtained in the business process. Rapport involves an individual knowing, liking, and trusting you. In today’s tight markets, businesses compete to expand their customer base while encouraging loyal, repeat business from existing clients. Many businesses attempted to woo customers with special offers, new features, free shipping, and countless other promotions. Contrary to this practice, our research shows that 85% of your client base will give you loyal, repeat business if they begin trusting and liking the individual(s) who represent your company. This is the essence of our training in consultative collections.
Rapport Mastery™ is…
…the possession of skills and the genuine desire to develop relationships of mutual trust and emotional affinity. Those who have achieved Rapport Mastery™ have developed the skills to recognize and adapt ones communication and behavior style to the styles of others. Therefore, they are able to transmit the true meaning of words and symbols. Likewise, they are able to listen objectively, defuse conflict, and build relationships with others.
At Pici & Pici, we have 30+ years in the communication training industry. We have invested enormous effort in understanding the complex subject of human interaction. Our work has resulted in the construction of a methodology that makes human behavior and communication easy to understand and a program that helps participants apply these principals for immediate positive results.
We work with companies who want to secure their cash flow by increasing account receivables. Call us at 407-947-2590.
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