Keys to Improving Your Collections Process


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Does your company employ a sound strategy for collections? Could it use some tweaking? Are you panicked everyday waiting for receivables to appear? Follow these key strategies before, after and during your sales process to improve your collections.

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Keys to Improving Your Collections Process

  1. 1. Key Steps to Improving Cash Collections Hennessey CAPITAL Growth Capital. Financial Wisdom. ®
  2. 2. Financial Spectrum Seed Capital Angel Investment early stage equity investment Venture Capital early/mid stage equity investment Asset-Based Finance early/mid stage debt facilities SBA Lending mid stage debt facilities Equipment Finance asset specific mid/later stage financing Conventional Bank Lending later stage debt facilities Start-Up Rapid Growth Maturity
  3. 3. Factoring <ul><ul><li>Simple way to access cash tied up in A/R </li></ul></ul><ul><ul><li>Leverage up to 90% of invoice value </li></ul></ul><ul><ul><li>Use for specific invoices or specific customer </li></ul></ul><ul><ul><li>Can be used in conjunction with current bank facility </li></ul></ul><ul><ul><li>Cost is based on percentage of sales </li></ul></ul><ul><ul><li>Combine with business resource services </li></ul></ul><ul><ul><li>- Credit, Collection and Treasury Management </li></ul></ul><ul><ul><li>Provides additional level of invoice management </li></ul></ul>
  4. 4. Steps to Improve Cash Collections The Sale Before During After
  5. 5. Key Steps - Prior to the Sale <ul><li>Understand competition and value of your product </li></ul><ul><li>Know your customer AND your customer’s customer </li></ul><ul><li>Develop risk tolerance level </li></ul><ul><li>Be prepared to say “NO!” </li></ul>
  6. 6. Collections in Action <ul><li>Who is the end customer? </li></ul><ul><li>Selling to a municipality – understand the processes and potential “red tape” </li></ul><ul><li>Auto supplier – understand the supply chain and how industry trends or news may impact your payment cycle </li></ul><ul><li>Consider your risk level </li></ul><ul><li>$100k sale 20% profit margin- $20K contribution </li></ul><ul><li>$80k loss results in $400k of new sales at 20% margin </li></ul>
  7. 7. <ul><li>Ask around town </li></ul><ul><li>Don’t be afraid to negotiate and be creative </li></ul><ul><li>Set the rules of engagement </li></ul><ul><ul><li>Structure </li></ul></ul><ul><ul><li>Pricing </li></ul></ul><ul><li>Be upfront and honest </li></ul>Key Steps - During the Sale
  8. 8. Talk to your Customer <ul><li>Don’t be afraid to ask </li></ul><ul><li>Down payment: historically received 20% down, needed 40% due to bank restrictions </li></ul><ul><li>Company was rewarded, due to exceptional customer service and valued relationship </li></ul><ul><li>Terms </li></ul><ul><li>“ Cash in” needs to match “cash out” </li></ul><ul><li>Payment terms can be based on progress/milestones accomplished on a project instead of payment upon completion </li></ul>
  9. 9. Key Steps - After the Sale <ul><li>Develop and follow your process </li></ul><ul><li>Consistent internal and external communication </li></ul><ul><li>Build a relationship with your customer </li></ul><ul><li>Recognize and understand the red flags </li></ul><ul><li>Know your leverage points </li></ul>
  10. 10. Collections in Action <ul><li>Relationships </li></ul><ul><li>A/P may be willing to give you “behind the scenes” insight, if a solid relationship has been built </li></ul><ul><li>Delayed payments - be cautious </li></ul><ul><li>Requests to pick up a check in person </li></ul><ul><li>Arriving unannounced </li></ul><ul><li>Ask for credit card payment </li></ul><ul><li>Leverage </li></ul><ul><li>Tooling supplier - hold up shipments, lien filings </li></ul><ul><li>Staffing - stop sending people </li></ul>
  11. 11. Credit Resources <ul><li>Dun & Bradstreet – provides commercial information on businesses. </li></ul><ul><li>Moody’s – provides credit ratings, risk analysis and research </li></ul><ul><li>Hoover’s Inc.– provides information primarily on publicly held companies </li></ul><ul><li>Bernard Sands – provides information on companies in the retail industry </li></ul><ul><li>Ansonia Credit Data – Co-op for credit information, members provide their credit history to be shared </li></ul>
  12. 12. Credit Resources <ul><li>TransCredit – provides information on the transportation industry </li></ul><ul><li>Experian – known for personal credit reports but also provides information for businesses </li></ul><ul><li>Yahoo Finance – business news and credit information, primarily on publicly held companies </li></ul><ul><li>Business Capital Risk Control Services – provides background information on businesses and individuals </li></ul>
  13. 13. <ul><li>Questions? </li></ul>
  14. 14. <ul><li>Thank You </li></ul>Mike Semanco President & COO Hennessey Capital [email_address] 248.658.3201 Candace Pavliscak Senior Vice President Hennessey Capital [email_address] 248.658.3204 Learn more and contribute at: