Luận Văn Salesperson Failure In Smc Tan Tao Limited Company.doc

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UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business
------------------------------
Nguyen Hung Cuong
SALESPERSON FAILURE IN SMC TAN TAO
LIMITED COMPANY
MASTER OF BUSINESS ADMINISTRATION

UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business
------------------------------
Nguyen Hung Cuong
SALESPERSON FAILURE IN SMC TAN TAO
LIMITED COMPANY
MASTER OF BUSINESS ADMINISTRATION
SUPERVISOR: TRAN PHUONG THAO

TABLE OF CONTENTS
EXECUTIVE SUMMARY .................................................................................................. 1
1. PROBLEM CONTEXT ................................................................................................. 3
1.1 Company background ............................................................................................. 3
1.2 Symptoms of the problem ....................................................................................... 4
2. PROBLEM IDENTIFICATION ................................................................................... 5
2.1 Situation analysis .................................................................................................... 5
2.2 Potential problems .................................................................................................. 9
2.3 Central problem validation ................................................................................... 14
2.3.1 Central problem identification ....................................................................... 14
2.3.2 Central problem definition ............................................................................. 15
2.3.3 The important of the problem ........................................................................ 16
3. CAUSES VALIDATION ............................................................................................ 18
3.1 Lack of Salesforce training programs ................................................................... 19
3.2 Inappropriate criteria for sales performance evaluation ....................................... 20
3.3 Poor skill in debt collection .................................................................................. 21
4. ALTERNATIVE SOLUTIONS .................................................................................. 24
4.1 Redesigning KPIs for salesperson ........................................................................ 24
4.2 Develop training workshops about debt collection process ................................. 27
5. ACTION PLAN ........................................................................................................... 29
6. CONCLUSION ........................................................................................................... 33
7. SUPPORTED INFORMATION ................................................................................. 34
7.1 Summary of methodology conducted ................................................................... 34
7.2 Summary of financial report ................................................................................. 35
7.3 Detail of the Cause and Effect Diagram ............................................................... 36
7.4 Late – invoice payment survey ............................................................................. 38
7.5 The structured interview ....................................................................................... 39
7.5.1 Interview guide .............................................................................................. 39
7.5.2 Summary of transcript .................................................................................... 40
7.5.3 Transcript ....................................................................................................... 41
7.6 The unstructured interview ................................................................................... 47
8. REFERENCES ............................................................................................................ 55

LIST OF FIGURE
Figure 1. SMC Tan Tao structure........................................................................................3
Figure 2. Customer's payment status of SMC Tan Tao in 2016 .........................................5
Figure 3. The initial Cause and Effect diagram ................................................................13
Figure 4. The final Cause and Effect diagram ..................................................................23
Figure 5. Model of salesperson performance evaluation. .................................................25
Figure 6. KPIs for salesperson of SMC Tan Tao..............................................................26
Figure 7. Action plan 1......................................................................................................30
Figure 8. Action plan 2......................................................................................................32
Figure 9. Detail of the Cause and Effect diagram.............................................................37
LIST OF TABLE
Table 1. Net cash flow from operating activities in recent year..........................................4
Table 2. Collection ratios of SMC Tan Tao compared to other competitors in steel
industry..........................................................................................................................4
Table 3. Number of day overdue of customer.....................................................................6
Table 4. Customer’ reasons for late-invoice payment.........................................................7
Table 5. Percentage of customer’ reason for their late-invoices.........................................8
Table 6. Cost estimation for training program ..................................................................33
Table 7. Statement of balance sheet ..................................................................................35
Table 8. Income statement.................................................................................................36
Table 9. Cash flow statement ............................................................................................36

EXECUTIVE SUMMARY
In the economy integration nowadays, credit relationships are becoming increasingly
complex. The emergence of debt is a natural factor in business operations, which
includes both bank credit and commercial credit. Debt and debt control need to be
evaluated from both sides of the stakeholders: the credit provider (the creditor) and the
borrower (the borrower). Many businesses are facing high credit risk, in which the risk of
bad debt or late-invoice collection is one of the factors that need to be strictly controlled.
Particularly at SMC Tan Tao Limited Company, the unusual high of average collection
period ratio comparing other competitors in the steel industry, the customer's receivable
accounting for a large proportion of total current assets, the inappropriate credit policies
contributes to the company result: negative operating cash flow in recent two years.
The company has made plans for debt collection and debt management are not effective.
During the time of working in this enterprise, I noticed some problems in the management of
receivables from credit and business activities, especially those directly responsible for the
recovery of debts: salesperson. Therefore, the businesses management need to have a more
accurate overview of the importance of salesperson in collecting debt task and have specific
solutions to improve the efficiency of account receivable management. Therefore, the
businesses management need to have a more accurate overview of the importance of
salesperson in collecting debt task and have specific solutions to improve the efficiency of
account receivable management. Therefore, the company leaders need to have a more
accurate overview of the importance of salesperson in collecting debt task and have specific
solutions to improve the efficiency of account receivable management. Based on this actual
requirements, the "Salesperson failure in SMC Tan Tao Limited Company" is the subject of
master thesis graduation, the aim’s thesis will cover following contents:
- The analysis of negative net cash flow from operating, high average collection period
and late-invoice collection status at SMC Tan Tao through secondary data, survey, and
depth interview with customers and others employees.
- Identify potential problems and central problem of three symptom in company, based on
that content to validate causes of salesperson failure.
1

- Based on the analysis of the internal factors, combined with the environmental factors,
suggest the proposed solutions and action plan for the causes of salesperson failure.
2

1. PROBLEM CONTEXT
1.1 Company background
SMC Tan Tao Limited Company is the company professional in trading and importing
various types of steel, metal goods, construction materials, interior design materials
and construction equipment of all kinds, mechanical equipment, and frame warehouses,
factories with aluminum structures, steel and stainless steel.
SMC Tan Tao have 80 billion authorized capital with 64 employees located at Lot 33,
Trung Tam Street, Tan Tao Industrial Zone, Binh Tan District, Ho Chi Minh City.
Figure 1. SMC Tan Tao structure
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1.2 Symptoms of the problem
- Negative net cash flow from operating activities
Table 1. Net Cash Flow from operating activities in recent year
Unit: Million Dong
Cash Flow Statement
Item 2016 2015 2014
Net Cash Flow from operating activities -18,461 -86,235 -144,155
On SMC Tan Tao’s cash flow statement, the operational cash flow from 2014 to 2016
clearly is negative, this means the company cannot cover operations solely from
running the business. Negative operational cash flow also signify a growing company
that is hiring personnel, or it could signify a collections problem or poor debt structure.
- High average collection period
Table 2. Collection ratios of SMC Tan Tao compared to other competitors in steel
industry
Item SMC TLH HMC
2016 2016 2016
A/R Turnover Ratio 11.95 16.24 20.36
Ave. Collection Period 30.55 22.48 17.93
A/P Turnover Ratio 25.53 19.56 29.57
Ave. Payment Period 14.30 18.66 12.34
This table show the different time period between Ave. Collection and Payment period of
SMC Tan Tao (SMC), Tien Len (TLH) and Ho Chi Minh City Metal (HMC) Company
in Steel Commercial Industry in Vietnam. As a general rule, the average collection period
should not be longer (1 + 1/3) of average payment period. Comparing ratios of three
companies above, there is a significant higher imbalance between two ratios at SMC than
the other companies when the time to collect money from customers is nearly 15 days
longer than time to pay the suppliers (4 days at TLH and 5 days at HMC). Because the
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payment term of steel exporter is usually fixed, a longer collection period in this case
will have negatively affect the short-term debt paying ability of the SMC’s business.
- Late-invoice collection
The issue of high collection period ratio (or late – invoice payment) has been cited as a
major problem facing business, and in the 2016 Debt Management Report of SMC Tan
Tao, the unusually high rate of late payment of commercial debt has found when 67% of
customers by revenue have invoices that pay later than the payment term. The below chart
will show average number of days overdue in 2016:
Customer's payment status of SMC TT in 2016
Timely Payment
Timely Payment
4% 33%
4 - 10 Days Overdue
17%
11 - 20 Days Overdue
29%
17%
21 - 40 Days Overdue
Longer than 40 Days
Overdue
Figure 2. Customer's payment status of SMC TT in 2016
2. PROBLEM IDENTIFICATION
2.1 Situation analysis
To determine whether or not average collection period (Table 2) results are good, simply
compare average against the credit terms SMC Tan Tao offer their clients. The company
allows their 71 / 108 client credit terms less than 15 days (account for 72.40% of sales
revenue), but the average collection period is 31.03 (Table 2) days, which is troublesome.
The below table will show detail of average number of days overdue in 2016
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Table 3. Number of day overdue of customer
Unit: Number of customer
In according to the information provided by planning department, only 33% of SMC TT’s
customer have timely payment with their payable account. This ratio, is significant higher
than the average industry ratio, although the day of overdue is the same, usually less than
3 to 4 weeks.
According to Atradius Survey Reveals state that (7) nearly 40% of the value of
B2B invoices in Western Europe paid late. Overdue invoices paid on average within three
weeks of due date. 1 in 4 respondents paid their suppliers late due to B2B customer's late
payment.
Furthermore, we conducted the survey and sent to all customers who have late payment to
find out the reasons which resulted into the symptom “Late invoice collection”. Finally,
we found out and summarized three main reasons that customer usually argued as
following:
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Table 4. Customer’ reasons for late-invoice payment
Revenue
Number of
Overdue Clients Quantity Customer Reason
(MT)
Feedbacks
Group 1: 4 - 10
19 26.39% 4,028 14.63% 19 They have difficulty in tracking their payables
Days Overdue
Group 2: 11 - 20
They have other critical suppliers. (6 clients)
31 43.06% 16,671 60.56% 18 They are in financial difficulty. (10 clients)
Days Overdue
They want to pay in bulk (2 clients)
Group 3: 21 - 40
18 25.00% 4,285 15.57% 12
They have other critical suppliers. (7 clients)
Days Overdue They are in financial difficulty. (5 clients)
Group 4: > 40
4 5.56% 2,543 9.24% 4 They are in financial difficulty.
Days Overdue
Total 72 27,527
In this table, the sales figure of customer have overdue invoice is 27.527MT accounting
for 62.7% of total sales in SMC TT. So those who found late payment to be the greatest
problem impact on a businesses’ turnover or cash flow. Not only because late-payment by
buyers costs a business have time and money in respected to pursuing collection of debts,
but also because bad debt reserves represent money that is unavailable for use in growing
the business.
Howorth (1) state that the issue of late payment of commercial debt has been cited as
a major problem facing small business and has precipitated much political debate (p.1)
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Table 5. Percentage of customer’ reason for their late-invoices
Reason Percentage Revenue 1.81% 14.63%
(MT)
Customers have difficulty
14.63% 4028
32.88%
in tracking their payables 50.68%
Customers are in financial
50.68% 13951
difficulty
Customers have other 32.88% 9050 Customers have difficulty in tracking their payables
critical suppliers
Customers are in financial difficulty
Customers want to pay in
1.81% 498 Customers have other critical suppliers
bulk
Customers want to pay in bulk
Total 100.00% 27527
The chart show reasons for late payment base on revenue in 2016, customer’ excuses
will continuously explore by asking them more detail including:
- Customers have difficulty in tracking their payables
 Invoice is late or missing( 10 customers )

 Invoice dispute — after contract agreed ( 5 customers )

 Invoice dispute — with no contract in place ( 4 customers )
- Customers are in financial difficulty
This is the most popular answer (56.67%) when conducting the survey for the other
groups, they tell their business may be going through tough times and they really are
unable to pay you back on time. The excuses for this can be anything: they may find
they are unable to sustain the level of borrowing they have built up, they haven’t yet
received the payment from their clients or the problems may have come about because
of some unforeseen event…
- Customers have other critical suppliers
This answer was discovered by the salesman’s experience when they communicate
personally with their customer. Furthermore, 36.67% of customer’ feedbacks have the
same opinion that SMC Tan Tao may not be ranked at the top of their payment priority
list.
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The reason behind this case is SMC Tan Tao have non-stringent credit criteria. Some
suppliers can claim interest and debt recovery costs if customer is late for paying
goods, the others even have the commission or annual awards for customer who make
the payment on time.
2.2 Potential problems
Moreover, in order to make the study more effective, clearer and convinced, together with
the supporting theories and the most updated analytics from Planning Department of
SMC Tan Tao, 5 in-depth interviews were conducted with four main groups, with details
as below: (the transcript and interview guide are mentioned in section 7.5 and 7.6 of the
thesis)
The first group includes customers who have difficulty in tracking their payables
The second group includes customers who are in financial difficulty
The third group includes customers who have other critical suppliers
The fourth group includes staffs those who currently work in Bill Function,
and salesperson in Sales Function.
The interviews were conducted via mobile phone with customers who have the late
payment at SMC Tan Tao to find out whether the answer in survey is real reason of their
late-invoice and another commentary about the role of salesperson in helping them make
the payment on time and more easily. In the other hand, the interview with staffs will be
happened face-by-face at meeting room in SMC Tan Tao to discover. Semi-structured
interviews were selected to carry out this research study. They allowed the participants to
elaborate and with that provided more flexibility, range and therefore the capacity to
elicit more information from the participant.
After doing the researches, explore the reality and from symptoms listed in situation
analysis, potential problem behind them was investigated including: inappropriate of
credit policy, failure of billing department and salesperson failure
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- Inappropriate of credit policy
To discover the reason why customers may find they are unable to sustain the level of
borrowing they have built up. Mr. Thanh, the sales manager reveal the real reason
behind customer’ excuses:
“Client was offered too much credit so they tend to buy more than their ability to
pay. This lead to take a longer time than the payment term in signed – contract.”
The causal factor of this answers is the failure in assessing customer credit line and their
solvency. Credit evaluation is the important process must go through to become eligible
for a debt; however, SMC Tan Tao doesn’t have the specific job which monitors the
financial performance and well-being of customers, or categorized the risky customer
who need the credit insurance to protect company against the failure of customers to pay
trade credit debts. Therefore; salesman and sale manager usually rely on “gut instinct”
when deciding whether to extend credits to customers. This would be dangerous, because
they are most important people while whether the customer credit line will be increased
or not.
Besides, salesperson usually propose a higher credit line for customers to hope they’ll
buy more in the future. If clients have the bigger order, salesman won’t hesitate to deliver
goods to achieve the sales target without considering to the difficulty of debt recovery
later. Mr. Tien, the Director whose company have late –invoice with 20-35 days overdue
said:
“I agree with you in principle, but it is not as simple as it seems. If you want to
have the big deal you have to follow the order carefully. Your salesman know this
rule, without grating credit he can’t get order in bulk like that”
In summary, SMC Tan Tao doesn’t have credit insurance for risky customer and
discount for early payment, those credit policies were inappropriate at the advanced stage
comparing with other competitors and that was a serious misjudgment
- Failure of billing department
Night customer who responded in Group 1 have the same main reason that they get trouble
in getting their invoices and the payment instructions are unclear. A disorganized
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accounting department or a lack of headcount that knows how to track and process
payables may cause delayed payments for them. Therefore, clients may not be able to
properly keep a track of their accounts payables, leading to confusions regarding payment
amounts and deadlines. Second, SMC Tan Tao keep sending invoices that have got small
little errors that make a big difference to the overall invoicing process and lead to invoice
dispute. In addition, three approval are require on each invoice is showing an inefficient
invoice processing system, that make invoices fail to reach the client on time and so the
payments get delayed as well
The faster that the billing department generates invoices and sends them to the customer
after a product or service is delivered the sooner payment will be received. As obvious as
this may be, SMC Tan Tao perform such work in batches and it may take them a week or
more to invoice their customers. Ms. Trinh, the billing staff, has the duty that include
combining and processing the vendor invoices into bills or invoices sent to clients said:
“I must pass these bills from the operations department, where the liability was
originally created, to the accounting department, where it must be recorded.
Finally, I show them to the deputy director to confirm the invoice. There are three
approval for each invoice. That is too much!”
Seconds, manual data input in invoices processing is time-consuming and prone to error,
re-keying into multiple systems so it’s easy to misplace and lose paper invoices. When
an invoice arrives with incorrect details, two things are likely to happen: clients will
waste time trying to figure out the details, or push it into the exception folder for later
correction. Either way, payment is delayed.
Paul (2) explained that it has been argued that late payment problems are
exacerbated by the fact that firms, especially small ones, do not send invoices or
statements on time, or in some cases, at all (p.11).
In addition, the salesperson who have more work created in tracking down customer's
payment status as they don’t have time to remind the overdue invoice; or give customers
the payment instruction on document not clearly so customers do not know when the
payments is due. On the other hand, they have too much difficulties to track customer’s
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payment progress through a system, and processing is fraught with access, retrieval
and storage issues.
- Salesperson failure
Under SMC Tan Tao payment terms, whenever business' clients pay their invoices late,
late payment interest can be claimed. But the truth is interest on late payment is not
rigorously enforced because of the salesman affair: that’s not the professional way to
encourage clients to pay on time and they will buy no more product at SMC Tan Tao.
Charging fee is taking money the customer could be using to pay on his loan and
diverts that money away from that purpose. It leads to the perception may be that a
client who doesn’t pay on time can repeat this behavior.
One of the roles of the salesperson is collecting bad paying accounts. But in the in-deep
interview with Mr. Tran Van Tung, the salesman, reveal that their time is better spent
selling the product. Every collection call they make is one less sales call that could have
been made and he don’t want to break his close working relationships with customers to
convince them to more quickly retire past due balances. In their opinion, if the bill isn’t
paid, the sale isn’t really made and the customer delay for few days to make the
payment in steel industry is acceptable.
Moreover, SMC Tan Tao also doesn’t have early payment discount, which help
customers to save a significant amount of money. That is the motivation for customer to
pay sooner because the longer company wait to get paid, the more things that can happen
that may prevent the buyer from satisfying its obligation.
Together with the Late – invoice collection literatures & theoretical research and 3 in-
depth interviews with online survey to different groups of customer. The following
cause-and-effect map with main contents and reasons has just been created.
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Figure 3. The Initial Cause and Effect Diagram
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2.3 Central problem validation
2.3.1 Central problem identification
Base on the initial cause and effect map, three potential problem of SMC Tan Tao are
that they have inappropriate credit policy, failure of billing department and salesperson
failure that lead to the late-invoice collection. However, in this essay only the influence
of salesperson failure on company symptom will be discussed because of the limit of data
and time as well as the complex between different functions in SMC Tan Tao.
While a disorganized billing department or a lack of headcount that knows how to track
and process payables may cause delayed payments for customers, this is relating to the
structure and procedures of company. Therefore, clients may not be able to properly keep
a track of their accounts payables, leading to confusions regarding payment amounts and
deadlines. On the other hand, the discount for early payment and credit insurance which is
offered client are subject to the company credit criteria and long-term orientation of the
board of directors. For example, credit insurance may be beneficial to some but just an
unneeded cost for others depending on company's situation. While early payment
discount can provide good results, it is not for everyone. As a matter of fact, offering
quick-payment discounts can have some serious drawbacks, clients could revert to paying
in 30 to 60 days without warning. Consequently, company could once again have the
same cash flow problems it were trying to avoid. In addition, because of the limit of data
and time as well as the complex between different functions, only salesperson failure
problem will be chosen is the central problem for three reasons following:
Firstly, salesperson has close relevant and appear in all three factor which is discussed
above will be chosen to investigate. Mr. Thanh, Sales Manager said about the
important of sales team in collection effort of company:
“Sales people communicate with customers more often than accounting
employees so they can act as an extension to the finance department to help collect on
past due invoice. In many cases, the salesman is the best person to involve in collections
which may be held up due to disputes over products they purchased. So if something
wrong with the account receivable, salesman should be primary responsible for that”
14

Moreover, sales force management is also in involved in the debt collection effort because
their close working relationships with customers will convince them to more quickly
retire past due balances.
Rottenberger (3) explained that according to Didier Muller, vice president of Carbone
USA Corp, in New Jersey, there are two essential benefits to this type of setup:
“First, ensures that your credit department won’t call and destroy relationship that the
salesperson has built. Ann second, it motivates the salesperson provide proper
follow-up and a better return on (p.2).
Finally, the other five reasons are closely related to the salesperson's failure to collect
the receivable on time. That are the wrong perception, working-related stress or the
qualification of employee – factors demonstrate that the significant of salesperson
failure is the most considerable problem SMC TT is facing to.
2.3.2 Central problem definition
Defining the salesperson failure term is important to measure the failure of
salesperson performance. But there is very little theory and review have been investigate
the issue of salesperson failure. I am aware of only two studies where salesperson
failure has been defined in major topic.
Ingram (5) defined failure as “the inability of the salesperson to consistently
meet minimum job standards (p.11).
Although this definition provides some guidance, it does not sufficiently define
the domain or dimensionality of salesperson failure construct.
Salesperson failure is measured by the termination (voluntary or otherwise) of the
salesperson or by the failure of the salesperson to reach expected goals or
standards such as quota, forecast, or other measures of productivity (6).
Finally, even within a given company, the definition of failure may be somewhat
situational, depending on the person or territory involved, the state of economy, or
any number of other circumstances.
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In the “Salesperson failure: Definition, Determinant, and Outcome (Morris MH, La
Forge RW, Allen JA 1994), respondents proved written definitions of the term failure
when it comes to the job of a salesperson. These were content analyzed, and the results
suggested a fairly high degree of commonality among the answers provide. The prevalent
theme in these responses was inadequate revenue generation, either in absolute terms, in
comparison to a quota, or relative to the costs associated with the salesperson. A number
of respondents also mentioned particular aspects of the sales task, such as poor
communication with customers, an inability to solve customer problems, low call
frequency, and inadequate follow-up or servicing accounts. Common too many of the
responses was the stipulation that performance deficiency had to be due to factors
controllable by the salesperson.
The definition were then sorted into three groups, based on whether the focused
primarily on input measures, outcome measures that were concerned with levels of sales
achieved, or outcome measures that were not sales-based.
Table illustrating checklist of information for common sources (4: p.6).
Increase in customer compliance Behavior indicative of failure:
Reduction on order from key accounts Bad work habits
Loss of accounts Inappropriate dress/appearance
Not reaching sales goal/quotas Unethical behavior
Selling wrong product
Selling to wrong customer
Unable to get along with buyers
Hard to work with and/or supervise
2.3.3 The important of the problem
Of all the challenges faced by business owners, the one that probably causes them the most
sleepless nights is the failure of their salesperson performance. Especially, this happen in
collecting debt from customers, so it is forcing many businesses in to making some tough
choices on how to use the cash they have available. Salesperson failure in
16

debt collection create additional economic cost for businesses, low employee morale
and decline in customer confidence.
- Additional economic cost
If salesperson fail in collect receivable, it can give rise to tighter financial conditions,
leading to increased administrative and financial costs as external financing may be
necessary in order to manage cash flows. Hence, late payments can give rise to insolvency
and ultimately bankruptcy, which means that firms cease to exist or in other words, exit
the market. Mr. Le Truong Giang, the Accounting Manager said about the costs generated
by late – payment invoice:
“For every 1 billion VND of annual turnover, a three-day drift in an invoice due
can take 11.5 million VND bite out of working capital (1 billion VND /261 working days
per annum). For many businesses, this means resorting to increased borrowings in order
to bridge the gap. Standard business finance carries a 10 per cent interest rate. In this
example, that equates to an extra 8, 2 million VND in additional interest expense,
directly cutting into margins”
A cash flow problem also arises when a business struggles to pay its debts as they
become due. Therefore, when cash flow is consistently negative and the business uses up
its cash balances, the problem becomes serious. Additionally, it negatively affect
business' credit rating, credit report of company including: liquidity, efficiency and cash
flow ratios… and impact the ability to get credit account privileges and loans in the
future. Mr. Ly Hoang Thanh, the Sales Manager:
“We do not have a policy of refusing to pay interest or late payment charges.
On the contrary, we take payment to suppliers very seriously and comply with our
contractual and statutory obligations at all times.”
- Decline in customer confidence
The relationship between salespeople and customers can get worse if both have no way
of dealing with overdue debts. The lack of skills in negotiating a sale contract will lead to
ambiguity in the terms of the payment of overdue interest. When a dispute arises, it is
very difficult to avoid complaints from customers. Not only will they not return to buy
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Company factors:
Economic conditions
Competitor aggressiveness
Customer loyalty
External factors:
Salesperson failure is obviously the matter that any company have to overcome.
There were many causes lead by this issue.
Morris (4) state that causal attributions regarding failure were grouped into those
external to the firm, those that were company-related, and those were related to and
controllable by the individual salesperson. The leading external factor was
competitor aggressiveness, while training programs were the most emphasized
company factor, and a lack of enthusiasm was the most emphasized personal factor
(p.9).
The detailed determinants and causes of salesperson failure has been listed
below:
Salesforce recruitment Way salespeople are
procedures assigned to
territory
Salesforce training Methods used to motivate
programs salespeople
company's good but also tell the other people about the bad story. This will affect
both the image of the company, showing the lack of transparency and
professionalism of employees in receivables management. Ms. Hang, Purchasing
Manager of PEB Steel Building said:
“SMC TT need develop a clear and visible process to sales staff to facilitate the
customer in checking and paying invoices in the signed contracts. Disputes on overdue
invoices that are not properly processed will negatively affect customer confidence
about company’s image”.
- Low employee
morale
The salesperson failure to manage the accounts receivable affects not only the
performance company, but also the employee's attitudes and morale. Excessive pressure
from the managers in bad debt recovery, customer disputes over invoices, huge workloads
on customer payment tracking will exhaust employee’s productivity. Employee morale
problems can quickly affect a team’s quality of work. Signs of trouble include missed
deadlines, an increase in mistakes or a decline in customer service and turnover.
3
.
CAUSES
VALIDATION

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Ways salespeople are Poor planning/organization Insufficient product
evaluated skills knowledge
Personal factors: Poor time management Poor people skills
Lack of ambition Lack of enthusiasm Lack of experience
Not persistent enough
Based on the above Cause-and-effect Diagram and theories informed, two more in-deep
interview was conducted with the participant of Sale Manager: Mr. Thanh and Sales
Executive: Mr. Tung who will provide objective perspectives on the weakness of his
sales team in collecting debt task (the transcript and interview guide are mentioned in
section 7.6 of the thesis). Three causes have been discovered as following:
3.1 Lack of Salesforce training programs
In SMC Tan Tao, the salesman do not have the specific programs to train and utilize a
number of financial tools to evaluate the credit solvency of a potential borrower, so the
granting of credit depends on the confidence the salesman and sales manager have in the
borrower's credit worthiness. To extend credit to and how much credit to extend, they
are lacked of a structured process to follow when determining which customers should
be. Mr. Ly Hoang Thanh, Sales Manager said in the interview:
“We do not have any training program for salesperson. They have to learn
everything themselves by observation how other people work, we are a friendly team
and everyone is happy to support each other”
In addition, because of industry characteristics, sales employee in SMC Tan Tao usually
have close relationship with their customer, that is build the perception of them to think
that delay for few days is acceptable. They are regularly visit and check raw -materials
demand, so if customer have the bigger order than current credit line they will not affair
to increase the limit to avoid losing the relationship in the future without considering the
ability to make the timely payment.
The question is how close is too close in customer relationship. Being professional as a
salesperson includes insisting on cancellation fees, prices, and payment periods. This is
exactly what should apply to the relationship between business partners: professional
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distance. Therefore, salesperson rely on gut instinct when deciding whether to
extend credit to customers, this would be dangerous.
3.2 Inappropriate criteria for sales performance evaluation
KPIs (Key Performance Indicators) should be the most important measures used by sales
teams to track their progress against strategic goals. A well-designed set of KPIs ought to
provide the vital navigation instruments that give salesperson an understanding of current
levels of performance. Those are some duty for sales executive position in SMC Tan Tao:
- Responsible for maintaining and developing the steel product offered by SMC.
- Seeking, evaluating and developing new and existing customers.
- Responsible for the department's sales target assigned by the Sales Manager.
- Manage customer's debts adhere to company
procedures. etc.
However, in practice, these well-intended KPIs can turn toxic of salesperson
because of the high proportion of sales target (accounting for 50% of KPIs) while
collection duties is only 10%. Furthermore, sales staff will receive commission
regardless the invoice isn’t paid. If the accounts gets passed 15 to 40 days, they only will
be ranked instead of A which is B or C for that month. This ranks have little effect on
their bonus at the end of the years, so they don’t try their best on collecting debt task. Mr.
Tung, the Sales Executive said in the interview that:
“SMC Tan Tao put KPIs in place to measure the relative sales performance of
salesperson. It then created league tables and rewarded the best performing sales
quota. The result was, the salesperson wants to sell to anybody and everybody, and be
comfortable with the client’s ability to pay to receive incentives for closing sales”
That is lead to the pressure to hit sales figure without considering other factors,
salesman affair that customer will no buy again anymore - those larger clients accounted
for as much as 40 percent of their revenue. Mr. Tung and Mr. Thanh also tell that:
“The salesperson is the one with the relationship with the customer and should be
used to resolve conflicts or billing discrepancies between the two companies. If you put
20

the salesperson in the role of collecting money that gets over 30, 60, 90 days or whenever…,
the salesperson starts to become a bill collector in the eyes of the customer”
“At this point the salesperson is not as welcomed during the visits with the customer
because the customer is not knowing what to possibly expect for that visit/ call.”
In this case, salesperson think involving salespeople can impact the relationship
with the customer so that should be a consideration in deciding how and when to involve
salespeople. However, because of unclear KPIs, they think that they’ve escalated only
after accounting department efforts haven't succeeded. They don’t realize that no sale is
complete without payment and ultimately they should play a role. There's also the
question of paying commissions on collection or recognized revenue -- great if you can
pay based on cash received but also expect some resistance to that.
3.3 Poor skill in debt collection
On average, every salesperson in SMC Tan Tao has 30 to 50 clients, more work will be
created for salesman in tracking down customer's payment status, so it is not easy to
track and handle such a large volume of work if they do not have good planning skills.
Mr. Ly Hoang Thanh tell about difficulties in collecting debt.
“It’ depend on sales effort. How long they spent to read and analyze the credit
report every day. Time is money in sales. In the working hours, salesman have to
make many calls to have the order and handle other procedures. If he want to manage
debt well, he spend more time after working hours to detect which customers have late
– invoice and remind them soon.”
In the other hand, for customers with a good payment history, they always have a tracker
to handle the invoice is to the due days. This case, however, is not typical. There are even
those that contact the customer before the due date, just to remind them its close. For this
reason, to help the salesman in remember which customer need to look more closely, a
debt recovery report will be sent by the billing department every Monday. Despite the
fact that some salesman told they seemly don’t have time to read or totally forget to make
a follow-up call to ask clients directly if they have received the invoice and ask for a
specific date that the payment will be made. That’s why it’s so important to have a plan in
21

place when following up on a late payment. In truth, clients may have simply
forgotten about invoices, so salesperson need to approach the situation with care while
also attempting to change client’s behavior.
To make the overview picture of problems in SMC Tan Tao clearer, the following
final cause and effect diagram will show reasons that led to the failure of salesperson in
collecting timely payment, it is the chance for SMC Tan Tao to really see: what are the
actions that they need to take immediately, in the short run and in the long run. If not, late
- invoices can have a serious impact on operating cash flow and profit. Not only
because non-payment by buyers costs a business time and money, but also because bad
debt reserves represent money that is unavailable for use in growing the business.
22

Figure 4. The Final Cause and Effect Diagram
(Detail of Cause and Effect Diagram can be seen in section 7.3)
23

4. ALTERNATIVE SOLUTIONS
As mentioned in Final cause and effect diagram, there are three potential problem leading
to negative net cash flow from operating activities, late-invoice collection and high
average collection period. However, after reviewing the theories and based on the in-
depth interviews with 5 respondents from 4 different groups, it is important to realize the
central problem is salesperson failure, lead to the high rate of late-invoice collection in
commercial debt of SMC Tan Tao. Also, the causes lead to salesperson failure has been
defined including: lack of Salesforce training programs, inappropriate criteria for sales
performance evaluation and poor skill in debt collection. For criteria for sales
performance evaluation and Salesforce training programs, some of the proposed actions
and solutions will be released in order to solve the issue in sales team of SMC Tan Tao.
However, for poor skill of salesperson in debt collection, it cannot be solved in a short
run because of its complication and relation with other department in SMC Tan Tao, so it
won’t be mentioned in this part.
Realizing the danger of this situation, the management board has given some of the actions
to improve the current status. Also, some of the actions has been implemented. Below are
some of the alternative solutions for the biggest issues named: lack of Salesforce training
programs and inappropriate criteria for sales performance evaluation.
4.1 Redesigning KPIs for salesperson
In the KPI's statement for sales, although management have emphasized the great effect of
the debt recovery in practice, many salespeople only interested in selling but overlooked the
recovery of debt. A complete and effective transaction must include both sales and debt
recovery. Salesman need to find specific measures in debt management, such as building a
credit management system for themselves, regularly have training debt recovery skills...
Once mastered the way management and debt recovery skills, employees will have a
different perspective on the debt, and they will be more optimistic about the bad debt. It is
too difficult to measure the salesperson job and which tool is appropriate to measure the
performance of collecting debt task, regardless, the sales team must know
24

there is no easy road involved when it comes to commissions – either they’ll get paid
when you get paid or they’ll suffer a chargeback if you don’t get paid.
Several theoretical and pragmatic studies have sought to determine methodologies for
effectively evaluating and measuring the performance of salesperson and presented
sales managers tended to place a great deal of emphasis on qualitative bases rather than
quantitative bases.
Kerasi (8) state that performance standards are designed to measure the performance
activities that the company consider most important. Setting standards of performance
for the sales executive in the evaluation process requires consideration of the nature
of the selling job. In other words sales job analysis is necessary to determine the job
objectives, duties and responsibilities (p.51).
Table illustrating checklist of information for common sources (8: p.52).
Figure 5. Model of Salesperson Performance Evaluation.
The functionality outlined above diagram shows both qualitative and quantitative objectives
of the sales department which is linked with a series of performance standards that help
sales organization for consistent effective evaluation of sales people. This emphasis was
confirmed by responses to the question, "What five factors do you use and consider being
most important in the evaluation of salespeople?” In this case, SMC Tan Tao did not attach
importance to one of the most important factors, the selling expense
25

ratio. Therefore, redesigning KPIs for salesperson is the fastest, most economical
and efficient solution.
Current situation:
This is the criteria for salesperson developed by the company management. Every indicator
will be ranked from A to F, depended on salesperson performance’s indicator and it will
decide their salary for that month. The commission will be depend on the sales figure, so
they will receive more compensation if they can sell more product to customer.
Indicator KPI Percentage
New customers Seek and develop new customers 10%
Sales figure
Achieve requirement revenue, sell more
50%
kind of product
Customer’s inventory
Revoking and importing material reports
10%
from customer
Customer
Understand customer requirements,
information 5%
delivery methods…
management
Debt collection Control, assess and recover debts 10%
Participate in
meetings, company Absence, delay, except for justified
5%
events, training reasons or meeting outside of work
sessions
Number of failures or completion of
Report completing 5%
required reports.
Company’s rule Violation of the rules 5%
Figure 6. KPIs for salesperson of SMC Tan Tao
Source: SMC Tan Tao HR Department
26

Therefore collecting debt from customer only account for 10% of their salary, even if
salesperson can’t complete this task they can compensate for commissions from effort to
sell more products. This action will facilitate the provision of goods to customers
beyond their solvency - that lead to late-invoice collection.
Suggested solution:
The business have to restructuring the criteria for evaluating the salesperson performance
and raking method. Debt recovery should be accounted for 20-30% of their salary. In
addition to the fixed monthly salary, the salesperson is also entitled to a remuneration
based on the percentage of debt collected on a monthly basic and sale staffs should be
paid commission based on that KPI. The company also assigns specific responsibilities to
each member of the board, particularly the sales manager. Under the cost management
regime of the company, the sales team are responsible for finding customers for the
company. In this process, they must thoroughly understand the situation of production
and business as well as financial status of the partner to be able to advise the sales
manager to stop delivery if the customer does not pay the debt within a certain period of
time. They also have the responsibility to report to the sales manager if the customer has
unusual signs in payment or the customer’s business shows signs of instability in the long
run. The clear responsibilities, which help members in the sales department in the actual
handling this phenomenon and will help the company avoid losing large amounts of
money, not being appropriated from customers.
4.2 Develop training workshops about debt collection process
Businesses need to find specific measures in debt management, such as building a
credit management system, regularly training debt collection skills for employees ...
Because when Salesforce mastered the way how to manage debt and debt recovery
negotiation skills, employees will have a different perspective on the debt, and even,
they will can create specified plan about the customer's late-invoice collection
27

Attie (9) stated that sales training contributes significantly to salesperson knowledge and
skill levels, performance, effectiveness, customer orientation, and overall firm
performance. Businesses invest substantial time, money, and effort training their sales
team with ultimate objectives of increasing sales productivity and profitability (p.1).
Current situation:
For many years, SMC Tan Tao doesn’t have any training program which specialize in
debt collection process. In fact, many sales executive in SMC Tan Tao lead very
independent lifestyles. They’re on the road meeting retailers and managing their own
schedules. Due to the independent nature of this job in steel industry, training is often
not a huge concern for many sales managers and business management. Likewise, many
of them have been worked here for years and don’t feel that they need any additional
training.
However, training is necessary to sales success, and remains an ongoing practice in many
sales organizations. Although they was participated some workshops about sales and
product, they will be lack of knowledge about the importance of debt recovery. It’ lead to
wrong perception of salesman when they face to customer’ late invoices. Customers who
are frequent borrowers establish a big reputation which directly impacts on their ability
to secure debt at advantageous terms when they make transaction with salesperson. The
compliance with late payment charge, pressure on boosting sales figure… can improve
the revenue in short term but will damage the profit in long term. In the other hand,
salesperson also need some techniques to help to know potential partner's credit
worthiness before signing a sales order agreement. Salesman can learn how to evaluate a
company's financial status so that they can make informed decisions.
Suggested solution:
For many employees, debt collection is a "boring" job. Debt collection techniques
will help salesman work more efficiently, save money, time, and limit stress.
In addition, training will chance the perception of salesperson about late-invoice
collection, that harm the company cash flow and they will mastered in how to deal with
28

the excuse of customer. For economic benefits and other benefits, some customers do not
pay their debts because they are unknowingly because they do not have a sense of
payment. So, in the debt recovery process, employees should not give up or expect too
much hope in the customer. In the other hand, Salesperson should remember these
reasons whose customer usually excuse and should not be discouraged. There should be
some skepticism about the "reasons" that are often the only way for the debtor to delay
paying the debt. Give high priority to these customers on the "reclaim" list, because if
you are sympathetic, and believe in these reasons, it will be difficult for the employee to
complete the debt collection task.
5. ACTION PLAN
The first alternative solution: Company should redesign KPIs for salesperson. The
timeline for this step could range from 01 month up to 05 months. However, as the new
KPIs will play a key role in the deciding salesperson’s salary and commission so that
the requirement should be very specific and details. Furthermore, changes shouldn’t be
applied at the same time but divided into several stages. All the management team must
take part of this step but the main role will be the HR and Sales Manager.
29

Objectives Actions Participants Time Scale
Jan Feb Mar April May
2018 2018 2018 2018 2018
-Review previous year salary formula implementation and
actual results of debt collection
B.O.D
-Identify and clarify objectives and
Sales & HR
debt collection requirement from BOD for next year
Department
Increase the proportion of -Deciding the appropriate the proportion of debt collection
debt collection to change task in salary formula
the salary formula Notify about the timeline and implement the change for HR Department
salary formula. Salesperson
Re-evaluation the result of debt collection task and adjust B.O.D
the proportion if necessary Sales & HR
Department
-Change the commission -Listing how much factor in debt collection tasks which
B.O.D
formula depending on debt decide the change in commission
Sales Manager
collection performance: -Rating appropriate percentage in each factor
HR Department
-Determine realistic/obtainable collection goals and when
-Establish the appetite for commissions are paid
change with sales staff - Notify about the timeline and implement the change for HR Department
particularly high sales commission policy Salesperson
performers in debt Re-evaluation the result of debt collection task and adjust B.O.D
collection the proportion if necessary Sales & HR
Department
Figure 7. Action Plan 1
30

Benefits
Benefits of right KPIs will outline the important aspect for debt management within the
business, motivate and engage salesperson with company goals. First, the changes in
salary formula will highlight the important of collecting debt on time, create the
pressure for salesperson to do this task more effectively.
Benefits of having a sales commission policy based on the debt collection performance
will include improved productivity and increased employee motivation. This can become
a routine way to recognize and reward employee achievement. Salesperson like debt
collectors who work on commission may be highly motivated to convince clients to pay
the debt. Commission in this case will be like a compromise. Company will pay part of
the commission on the sale and half at the collection. As was stated, a salesperson is to
focus on sales but still do not the task to collect money.
The second alternative solution: Company should develop training workshops about
debt collection process: A professional salesperson is not limited to timely and full debt
collection but also have the ability to prevent or eliminate potential risks that can lead to
bad debts, doubtful debts. In order to do this, they have to know the "grip" by using
techniques, skills, and specific ways of managing debt, On the other hand they must know
how to deal with different type of customer, and especially the measures towards the
relationship "win both". That’s the reason SMC Tan Tao should develop training
workshops about debt collection process for its salesperson. The timeline for this step
could range from 01 month up to 02 months, training programs should be implemented at
the same time as redesigning KPIs to comprehensively change the perception and skills of
employees to recover overdue debt. Furthermore, it also expresses the determination of
the leadership in resolve the salesperson failure in collecting debt.
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Time Scale
No Actions Participants Week 1, Week 2, Week 3, Week 4,
Mar 2018
Jan 2018 Jan 2018 Jan 2018 Jan 2018
Feb 2018
1
Define purpose of activities training, skill sets and B.O.D
target activities Sales Manager
2
Determine participant’ needs training design and HR department
outline training Sales Manager
The type of training: On-the-job training,
HR Department
3 Classroom-style training, Technology-based
learning, Simulations
4
Choose a training center and develop a budget and HR Department
productivity loss
5
Evaluate the effectiveness and cost on the training B.O.D
program and re-select a center if necessary HR Department
6
Contact again with center to confirm the time and HR Department
number of participants. Sales Department
Email to notice the seminar and training schedule
7
and implementing training. HR Department
Track and monitor salesperson progress through Sales Department
customized training program
Re-evaluation the result of training program with B.O.D, Sales
8 the B.O.D’s purposes and adjust it if necessary Manager
HR Department
Figure 8. Action Plan 2
32

Benefits
First of all, training should cover following parts, that’s involving with:
- the prevention of the emergence of overdue debt including: credit
evaluation, credit worthiness, credit report training
- emphasize the importance of late-invoice collection to company’s cash flow,
changing salesman’s attitude about late payment fee
- collections strategy helps salesperson get invoices paid and builds strong business
relationships at the same time
- introduce tools (invoice factoring, assets based loan…) to solve with unpaid
invoice or working with a collections agency.
Costs
- hire other institute to perform the course.
- the costs are estimated for 17 sales executives is presented as following table.
Table 6. Cost Estimation for Training Program
No Description Estimating cost (VND)
1 Hiring trainer (4 days training/month) 17,000,000
2 Catering –meals, lunches, tea and coffee breaks 4,000,000
3 Training documents and equipment 1,000,000
4
Additional cost (electricity, telephone, note papers, clip
1,000,0000
board, pens, evaluation form, etc.)
Total Expense 23,000,000
Training Cost per Employee 1,352,941
6. CONCLUSION
This thesis has focused on finding the main problem causing late-invoice collection
situation of SMC in recent years. Thus, among potential problems led to late-invoice
collection, salesperson failure is proved the key factor. It could be seen that Salesforce
training program, way sales people are evaluated and poor planning skill of salesperson
33

plays an important role in explaining salesperson failure in debt management from
commercial and end – user clients. The purposes of this thesis was to state clearly and
inform the real issue that is occurring in SMC Tan Tao. From that, the company will take
actions immediately to give some proposed solutions, then choose the best one.
Understanding well the issue and resolving it is also positive way to gain the better credit
rating from banks, improve the operating cash flow and minimize the interest expenses.
7. SUPPORTED INFORMATION
7.1 Summary of methodology conducted
Primary or secondary data are two sources that can be obtained in this thesis. Data and
information took from primary source is for the purpose of identifying and solving a
problem. Nevertheless, secondary sources are the existing data and information that
aims for another purpose than resolving the problem
Secondary data obtains reliable sources from internal company like report and figures
of Accounting, Planning and Department, Billing Department; and other supporting
documents relative with late-invoice collection and salesperson failures such as
literatures, books, journals, previous researches. Then all collected data was compared
with reality in order to have specific information. As for primary data, a qualitative
approach was applied for this study because of the limited timeframe and the ability to
access the steel industry in Vietnam.
The main method for collecting qualitative data is in-depth interviews but the
quick survey was sent to overdue clients to notify about customer’s payment status and
collect their feedbacks about late-invoices. The researcher conducted two times of in-
depth interviews for respondents of internal company and external company to explore
the potential problem and another interview is used to seek causes. Every in-depth
interview took about 25 minutes to 30 minutes, is conducted at the company lounge or
via smartphone. Questionnaires were designed clearly and open-ended to get valuable
information. In order to gain deeper insights of the phenomenon of the study, in-depth
interviews of respondents from three groups were carried on:
34

• The first group includes three people who are currently SMC’s clients with
different companies: (1) Ms. Xuan - Purchasing Employee; (2) Mr. Tien - Director and
(4) Ms. Hang – Purchasing Manager.
• The second group includes three people who are working at SMC such as
(1) Ms. Trinh - Billing Employee, (2) Mr. Tung - Sales Executive and (3) Mr. Thanh
- Sales Manager.
7.2 Summary of financial report
Table 7. Statement of balance sheet
Unit: Million Dong
Statement of Balance Sheet
Item 2016 2015 2014
Total Assets 588,823 424,184 334,443
- Current Assets 458,015 287,777 189,527
Cash 34,470 8,346 4,692
Short – Term Investment 65,000 32,000 -
Account Receivable 96,675 196,254 115,344
Inventory 223,062 13,901 15,859
Other Current Assets 38,808 37,274 24,231
- Fixed Assets 130,808 136,407 144,916
Total Liabilities and Equity 588,823 424,184 334,443
- Liabilities 476,419 341,101 252,220
Current Liabilities 443,319 293,601 190,320
Long – Term Debt 33,100 47,500 61,900
- Owner Equity 112,404 83,082 82,222
SMC Tan Tao has the total assets which is increasingly every year from 2014 to 2016
but the assets have been financed 60 – 80% debt, has a much higher degree of leverage
and risky.
35

Table 8. Income statement
Unit: Million Dong
Income Statement
Item 2016 2015 2014
Net Revenue 1,749,977 1,382,655 1,235,875
Cost of Goods Sold 1,672,140 1,348,033 1,213,635
Gross Profit 77,837 34,622 22,241
Operating Expenses 36,867 33,531 21,388
Operating Income 40,970 1,091 2,863
Other Income -139 27 -4
Income before Tax 40,832 1,118 2,858
Tax 8,427 258 637
Net Income 32,404 860 2,222
In this table, net income have the big fluctuation in 2016, with 32 billion because of
the gross profit are more than double that of 2015
Table 9. Cash flow statement
Unit: Million Dong
Cash Flow Statement
Item 2016 2015 2014
Net Income 56,715 14,146 8,772
Net Cash Flows from operating
activities -18,461 -86,235 -144,155
Net Cash Flows from investing
activities -34,935 -28,973 -27,775
Net Cash Flows from financing
activities 79,682 89,976 180,017
Net increase in cash flows 26,286 -25,231 8,088
On SMC Tan Tao’s cash flow statement, the operational cash flow from 2014 to 2016
clearly is negative, this means the company cannot cover operations solely from
running the business.
7.3 Detail of the Cause and Effect Diagram
36

Figure 9. Detail of the Cause and Effect Diagram
37

7.4 Late – invoice payment survey
Late – Invoice Payment Survey
The email was sent to customer who has the overdue payment at SMC Tan Tao. Follow
the data provided by SMC Tan Tao Planning Department, we notify to you about your
company payment status as the below:
Names of Company: [ABC Company]
Sales volume for every month: [XXX] MT
The average overdue days: [XX] DAYS
Please tell the reason why your company pay the invoice later than the payment term
in contract:
………………………………………………………………………………………………
………………………………………………………………………………………………
Other commentary:
………………………………………………………………………………………………
………………………………………………………………………………………………
The survey only aims to gather information to improve the late –invoice payment at SMC
Tan Tao, we will not disclose personal information in the survey without your
permission. Thank You & Best Regard
38

7.5 The structured interview
7.5.1 Interview guide
BACKGROUND INFORMATION
WARM-UP QUESTIONS
No. Key Probe Aims
1
How often do you usually buy How many tons/month or for an
material at SMC Tan Tao? order?
2
How about the quality of
Do you have any feedbacks?
material?
MAIN QUESTIONS
Do you think making the
3 payment late is the common Why? Please explain.
problem in steel industry
Do you think the payment
4 instruction is clear and easy to Why? Please explain.
Reason for having
understand?
late – invoice
How does it late? What is the
payment
main reason? How do you feel?
5
What reasons why do you Are there any factor come from
make the payment late? inside SMC Tan Tao? Which
department? Could you explain
more?
What happen if you have the
Do they remind it regularly?
Punishment of
6 How about the late-payment fee
late-invoice payment? SMC Tan Tao
or any penalty?
Do you have close relationship How about the salesman? Do
7 with anybody in SMC Tan you usually have dinner with
Salesman role in
Tao? them?
collecting debt
8
Do you think salesman have Why? Please explain. Who have
the role in collecting debt? to do that?
To conclude, in your opinion,
do you think salesman is the
9 most important factor that Please explain.
make company have the late-
invoice collection?
Are there any questions that you would like to ask regarding the topics discussed today?
39

7.5.2 Summary of transcript
Q Ms. Xuan Mr. Tien Ms. Hang Common
Purchasing Director Purchasing manager
employee
1 - 40 to 80mt - 60 to150mt - 200 to 400mt Bulk buyers often
- Every week - Every month - Every month have longer
buying cycles
2 Qualified, but Qualified Qualified The material meet
sometimes delivery the qualification
late requirement.
3 - Yes, could be late -Yes, because steel -Yes, because we This is common
less than a week business usually have too much issue
because of need a hulk amount suppliers, difficulty
procedure of cash to pay them on time
4 - Not clearly, - No, I don’t - Sometime we have There are some
waiting for a week complain about it trouble with your problem with
to have the correct billing department billing
invoice department.
Especially with
customer who
have shorter day
payment term
5 - Procedure within - Financial difficulty - Other critical Variety of reason,
both party - Unexpected suppliers including
- Salesperson’s payment period - No late payment salesperson factor
reminder penalty and discount and relating
for early payment departments
6 - Remind once a - Remind via phone, - Remind via phone, - No late payment
week via phone email and personal email charge
No late payment appointment - No late payment - Via indirect
charge - Arrears letter charge method to remind
- No late payment overdue debt
charge
7 -Not to close -Yes, we usually -Yes, we discuss With big
relationship, we meet to negotiation every day about customer,
rarely have face to new order. market information salesperson have
face appointment closer
relationship
40

8 -Yes. He can help -Yes. Salesman -Yes. He can Yes. Salesman is
us to tracking the could offer more suggest company to the connection
debt report, fix the suitable and realistic offer client more between business
invoice and remind payment term to method to encourage management and
us about late meet my company us make the customer
invoices cash circle payment on time
9 -Yes. I think sales -Salesman can be a -In addition to offer Yes. Salesman
effort will improve small impact of this new payment effort and their
the late-payment. -- phenomenon. method – which knowledge will
They should be -Ineffective of depend on the minimize the risk
aware of customer communication and company’s credit of unpaid or late –
accounts and negotiation skill, policy. invoice by using
payment status they will get trouble -Salesperson also is the appropriate
in finding reason for the factor to method
those late invoice. convince the
management in
updating the criteria
credit of other
competitor
7.5.3 Transcript
Transcript 1
Name: Ms. Xuan Days overdue: 4-10 days
Position: Purchasing employee Main reason: Difficulty in tracking the payable
I: Hi Ms. A. How are you today?
X: Great. How are you doing?
I: Today, I’m going to conduct the interview with you about my company’ problem,
that’s late – invoice collection. This problem occur very regularly, and you know
it’ll affect my company operation. You have been a valued customer for many
years so I really want to know what reasons that make you make the payment
later than the signed contract.
X: Oh. I’m very sorry about the late invoice. There are some causes that lead to
this problem…um but I don’t think it’s serious, my company only pay 3-7 days
later than payment term.
41

I: Could you explain it more clearly? 7 days is not the short time.
X: Let me see… I usually see your invoice after 2-5 days after received goods then I
have to check again and sent it to the accounting department. If everything all
right we’ll make the payment for supplier every Tuesday or Friday.
I: But why take up to 5 days to get an invoice?
X: I receive the draft invoice one days after you delivery goods via the email from Ms.
Trinh, your billing employee. But you know, I have a lot of emails every working
days so sometimes I haven’t check her email if she or salesman doesn’t make the
follow-up call.
I: I can sympathize with your reasoning, but I just can't take for granted that it's
completely sound.
X: And another reasons, it happen regularly. There are the mistakes with draft
invoice that lead to take another days to resolve. After that, although all the paper
were completely full, I even have to get my bill the next 2 working days
I: Ok I understand that issue. 2 days to get the invoice to your office is not the
short time.
X: Thank for understanding. I don’t want to make the late payment but you have to
send to me the quality and accurate invoice. If not, it will wasting time and money
for both companies.
I: Yes. I quite agree with you. Do you think whether salesman effort is a factor
that raise this problem?
X: Um… I think your company’s salesman should have the responsibility in help me in
tracking my payable. He only remind me once a week about the late invoice I
have, but he doesn’t list them more specific.
X “Could you please make the payment soon?” The boring question and he doesn’t
know what really causes which make my company pay the invoice late.
I Could you tell me more specific about the role of salesman in tracking debt?
42

X I suggest maybe he should make more call to follow the debt, sent me the database for
me every week to remind me which invoice is sent and make the payment soon.
I: So is there anything else that you would like to add?
X: Nope, I think that about covers it.
I: Well, thanks for taking the time to talk with me today. I really appreciate it.
Transcript 2
Name: Mr. Tien Days overdue: 21-35 days
Position: Director Main reason: Company is in financial
difficulty
I: Hi Mr. B. How are you today?
T: Hello Cuong, which issues do you have any for me today?
I: Thanks for understanding. Today, I’m going to conduct the interview with you
about my company’ problem, that’s late – invoice collection. This problem occur
very regularly, and you know it’ll affect my company operation. You have been a
valued customer for many years so I really want to know what reasons that make
you make the payment later than the signed contract.
T: Um… About the invoice, how many days do we make the payment for your
company later than the signed contract?
I: It’s between 21 and 35 days. It’s too late than usual, which problems with the
invoice you face to?
T: The salesman offer me 15 days payment term in the contract, but you know my
customer… I have not been paid by my customer yet, they pay the invoice for my
company 30 days – 45 days. Therefore, I think I need a longer payment term to
make the payment on time.
I: Could you tell me more specific about this matter?
43

T: I have to buy in the materials costs money before the work is even started. So I
needs customers to pay promptly when their bills fall due. But that doesn’t happen
often, so almost 80% of the projects company’s worked on recently have been paid
late.
I: But in the past, the salesman increase the payment term from 7 days to 15 days for
your company. I think this’s your problem and you should balance you budget
before deciding to purchasing materials.
T: Yes, I know. By agreeing to the terms and conditions, I has an obligation to pay
you within the time frame specified. But you see… although I don't have the
money right now but I will pay your company as soon as possible.
I: But why don’t you make an immediate partial payment and provide salesman with
an exact date that he will receive the rest?
T: Um… I did that several time. You can see I’m the big client and we’re working
together for many years. My orders in huge quantities need an equivalent amount of
money. If the customer has not paid me, I have to disburse money at the bank so that I
can make a replacement. Disbursement in banks is quite troublesome so it is
difficult to confirm the exact time
I: So maybe your company was offered too much credit than ability so you
cannot carry big orders?
T: I agree with you in principle, but it is not as simple as it seems. If you want to
have the big deal you have to follow the order carefully. Your salesman know this
rule, without grating credit he can’t get order in bulk like that.
I: It seems I understand the reason. But you said you have work with SMC Tan Tao
for a long time so why your business still not overcome this problem
T: Unfortunately we can’t grow the business. We at best can stagnate where we are.
We had to let one of our apprentices go through a very difficult time that we
suffered at the beginning of the year, and something we’re hopefully trying to push
on from that, but we need to be on a steady firm footing to be able to do that.
44

I: So from what you’re saying, the situation is getting worse?
T: I believe it is. If I can give you an example, three years ago we had no money
outstanding beyond fifteen days. I hope it plateaus off and doesn’t become any
worse because we certainly couldn’t carry on in business if it does.
T: Nope, I think that about covers it.
Transcript 3
Name: Ms. Hang Days overdue: 11-20 days
Position: Purchasing manager Main reason: They have other critical supplier
I: Hi Ms. C. How are you today?
H: Nothing much. What’s up?
I: I’d like to have the short interview with you. Could you give me 15 minutes
to make it?
H: Ok. Sure. Which topic do you want to talk about?
I: Today, I’m going to conduct the interview with you about my company’ problem,
that’s late – invoice collection. This problem occur very regularly, and you know it’ll
affect my company operation. You have been a valued customer for many years so I
really want to know what reasons that make you make the payment later
than the signed contract.
H: Please tell me more specific about those late invoices, this is a common problem
in the steel industry
I: According to the information we received, you usually have the late invoice
between 11-20 days, the value of each invoice is from 500 million to 3
billion dong.
H: 11 – 20 days, that’s not significant time comparing with the amount of material we
bought every month. We’re big company but the budget can’t be pay for all the
45

supplier on time. Therefore, we have listed out a few of the most popular ones
below for both domestic and overseas suppliers, and turnaround capital for each
vendor.
I: So this mean my company is not number 1 priority?
H: Well not exactly. We pay back according to the turnaround policy, this time can
be sooner and the other time can be later.
I: Are there any factors encouraging your company pay the supplier sooner?
H: There are actually have some factor. You means…my director usually rank the
supplier based on the quality of material, time of delivery, others commission
for paying earlier
I: Commission for early payment? Does it means early payment discount?
H: Yes, exactly. An early payment discount is offered by some suppliers to
motivate credit customers to pay sooner. If the our company has adequate cash
or a readily available line of credit, the 1% early payment discount for paying 20
days early equates to a very attractive annual return of approximately 18%. If we
does not have cash or a credit line available, the early payment discount may be
small compared to a bank overdraft fee.
I: Not all sellers offer discounts for early payments?
H: Just a few. But the other suppliers usually have the awards for customer who
have on time payment for a half of year or a year. The discounts or awards add up
over time to save company a significant amount of money, particularly if several
of suppliers offer them
I: I see, but your company can be claimed interest and debt recovery costs if business is
late paying for goods. Follow the invoice payment term in SMC Tan Tao sales
contract, the statutory late payment interest rate can be up to 1% per month.
H: Do you think how your customers will react if you charge interest on late
payments? Taking legal action for non-payment can be costly and
irrecoverably damage relationship, and your salesman know that very clearly.
46

I: May it simply be worth being selective about who you want as customers?
H: If it happen, this’s the last time I choose your company is a suppliers for following
order in the future.
I Ok, I got it. Do you have other commentary for improve this problem?
H: No, I think that’s enough for today.
7.6 The unstructured interview
Transcript 1
Name: Ms. Trinh Working at SMC Tan Tao for 3
years
Position: Billing employee
I: Good afternoon. How do you to today?
T: Thanks you, everything is still good thought I’m have do lot of papers. So what do
you want to tell with me?
I: Today, I’m going to conduct the interview with you about your company’
phenomenon, that’s late – invoice payment. Do you know about this problem?
T: In the meeting, the management usually remind salesperson about customers who
have late-invoices.
I So whenever salesman remind you to send the invoice as soon as possible?
T: Yes. They often urge me to send the invoice quickly but you know… I have
hundreds of customer to contact and discuss about those invoice so how can I sent
them in a days. I really want to help salesperson to improve this situation but I
don’t have the responsibility to send reminders for payments and contact
customers.
47

I: Tell me more about your job responsibilities? For example:
T: Manage account balances to discover outstanding debts or other inconsistencies
and collect all information needed to calculate bills receivable. After that I check
the data input in the accounting system to ensure accuracy of final bill, answer
questions and handle complaints from customers regarding bills. Next I issue
invoices and bills and sent them to customers through various channels (mail, e-
mail etc.) and sent customer account statements periodically or whenever necessary
Every day, I update all accounting records with new payments, balances, customer
information etc…Finally once a week I report on activity to upper management and
sales department
I: How long the invoice was came to the customer?
T: It’s depend on many factor. The earliest is in 2 days from the date of receipt of
the goods if every is Ok
I: Why it take even 2 days if there’re nothing wrong?
T: I must pass these bills from the operations department, where the liability was
originally created, to the accounting department, where it must be recorded.
Finally, I show them to the deputy director to confirm the invoice. There are three
approval for each invoice. That is too much!
I: So it’s depend on your company procedure. If the invoice got some problem, what
is that?
T: Sometimes I send the invoice to the wrong address or contact, that will probably be
different from the person who ordered the work, because large organizations can be
complicated and sending an invoice to the wrong address could lead to it being lost
or delayed. In addition, some company have the complicated procedure so I really
waste time to complete all of them
I: Some customer have tell me about the unclear on the invoice, so what’re
your opinions?
48

T: In cases of newly incorporated companies or startups like SMC Tan Tao, internal
accounting problems frequently pop up because of lack of proper departmental
systems in place or simple because lack of employee. Only I have to take over
them is impossible.
I: So what do you want to tell with the management if you have chances? I mean the
changes to improve the invoice processing system
T: In my opinions, they should have the automated invoice processing. It can
significantly reduce the time, cost, risk and complexity of capturing, routing and
approving invoices. By reducing invoice processing time, company can secure
early-payment discounts and improve vendor relations, and also free up staff to
work on business-critical activities. With a documented, automated invoicing
process, I’ll simplify audit response and gain greater oversight into bottlenecks or
inefficiencies.
I: And last question, what do you can do to help salesman restrict those late invoice?
T: As I mentioned above, the purpose of the monthly debt statement is to tell
customers about their current outstanding balance. This is to give a brief and clear
report of the previous months, and finally to reminder the outstanding bills.
I: OK, thank you very much indeed.
Transcript 2
Name: Mr. Tung Working at SMC Tan Tao for 3
years
Position: Salesman
I: Hi Mr. D. How do you do today?
T: Thanks for asking, I'm doing fine though super busy. What’s up?
I: Today, I’m going to conduct the interview with you about your company’ problem,
that’s late – invoice collection. First, could you tell me about your customer, do
they usually have the overdue invoices?
49

T: They often have the late – invoice, almost 70% of my customer have this problem
but it’s about 5-15 days. Only a few of them have a payout date greater than 20.
I So what did you to do to resolve this problem? Do you remind them every day?
T: The customer who have less 7 days overdue, in this case, you better shouldn’t remind
them about those invoices if you don’t want to break close relationship with them. In
the other hand, it’s difficult to detect less-than-7-days late invoice. I have nearly 50
customer and customer’s payment progress system is too hard to use and control. So if
customer don’t make the payment until a week, I will be notified
about this issue when the Planning Dep. sent the payment report for every week.
I: What happen if the customer doesn’t even make the payment within a week?
T: We put together all of the evidence, setting out the invoices, the due dates, the
times it should have been paid, what the amounts were that we were claiming
in accordance with legislation and our costs incurred in reclaiming those debts.
I: How long have you been kept waiting by them?
T: Well, the longest one I can recall was about 6 days. Because of our experience now
with them I don’t give them that kind of latitude any more. We remind them that as
in the law we are entitled to start charging interest from the date the invoice
falls due, and we will tell them that we will start doing that unless they pay it
very promptly.
I: The interest? Did you mean the late payment fee charge? In any case, do you
have to apply a penalty to them?
T: Yes, the payment fee charge about 1%/month. But the truth is interest on late payment
is not rigorously enforced. You know… if you’re a small business, the chances are
there are many, many other suppliers, many other small businesses who sell the goods
and services that you sell. And if you go along to a large organization who is buying
your goods and services and say, ‘You haven’t paid me on time,’ what you’re going to
get is that the customer might actually pay you, but they might also then stop doing
business with you, so this is the problem with the
50

power relationships in these kind of business to business relationships. And what
we found consistently is that small businesses are very, very reluctant in the main
to actually exercise their rights, because they know they’re kissing goodbye to that
business relationship.
I: How about the customer who have overdue day long than 20 days? Do they tell
you the reason?
T: It was very difficult, they were quite evasive. We wouldn’t get emails responded to
or letters responded to or we would get passed around phone calls, but no one
actually coming back saying why they weren’t paying, and then you would have to
keep chasing them. We were then, you know another week further on and they still
weren’t committing to why they weren’t paying.
I: And to be clear, from your point of view, there were no extenuating circumstances?
T: There were no extenuating circumstances; there were no mistakes on my part. The
materials that were provided were fully qualified, finished and in terms of the
service provided, they were fully satisfied. There was no discussion over the
quality of the work done.
T: It’s about how company evaluate salesman’s performance. SMC Tan Tao put KPIs
in place to measure the relative sales performance of salesperson. It then created
league tables and rewarded the best performing sales quota. The result was, the
salesperson wants to sell to anybody and everybody, and be comfortable with the
client’s ability to pay to receive incentives for closing sales
I: Did you means salesperson should not involve in collecting attempt?
T: Yes. Exactly, credit department should be main responsible for this duty. The
salesperson is the one with the relationship with the customer and should be used to
resolve conflicts or billing discrepancies between the two companies. If you put the
salesperson in the role of collecting money that gets over 30, 60, 90 days or
whenever…, the salesperson starts to become a bill collector in the eyes of the
51

customer. This starts to put the “wall up” that the salesperson has had to
overcome in the beginning to gain the trust of the customer. At this point the
salesperson is not as welcomed during the visits with the customer because the
customer is not knowing what to possibly expect for that visit/ call.
I: OK, thank you very much indeed.
Transcript 3
Name: Mr. Thanh Working at SMC Tan Tao for 5
years
Position: Sales manager
I: Hi Mr. Thanh. How’s your work today?
T: Oh, same as usual. A lot of work but I still can manage.
I: I knew you were busy with your job. Could you give me 15 minutes to make the
interview with you
T: OK. I’ll give you 15 minutes, so what do you want to talk about?
I: Today, I’m going to conduct the interview with you about what causes of late-
invoice collection. You know there are 70% of invoice is paid late by client, so I
think that is the big problem that you need to discover. So base on company’ job
description, who is responsible for the debt collection task?
T: Uh… that’s belong to the sales department. My company don’t deliberate to put the
task of collecting on the salesperson but, you see they are people who talk with
customer more than others, so they can use their close relationship to do and get
things resolved quickly.
I: Are there any other department helping them in collecting late-invoice?
T: Our planning and accounting department. While planning department provide a
monthly summary about debt status to each salesperson for showing their
customers overdue invoices. This helps generate clear communication about
payable receivable of customers. Furthermore, accounting department is also in
52

involved in the collection effort. They check the delinquency number of customers
on the company's ERP system. If the number of days is over 10 days or significant
increases than the credit limits, will have alerts by email for salesperson. In
addition, salesperson are generally asked for information they might have about
customer’s business to provide for planning department to re-assess the credit
limit if necessary.
I: Does debt collection impact on salesperson commissions?
T: Actually, no. As soon as an account is aged 10 days beyond terms the sales team
should be alerted and asked to contact the customer as a matter of a customer
relations gesture – just to make sure everything’s OK. In addition, at this point, the
sales team must be cautioned to avoid any contact with the customer, regardless of
their commission situation.
I: How about the training program? How does salesperson have skills for better debt
collection?
T: We do not have any training program for salesperson for collecting debt. They have
to learn everything themselves by observation how other people work, we are
a friendly team and everyone is happy to support each other
I: But some companies have it all wrong. They invest a lot in product innovation,
marketing and R&D, but not in their current Salesforce… especially when the
competition is fierce
T: Yes I have the same ideas with you, salespeople can play a very useful role. By
using their personal relationships combined with their knowledge of the internal
workings of the debtor company to bring additional pressure to bear on the right
person or department. There are times when customers would rather have a
comfortable conversation with their sales rep than a conversation with the
financial/credit personnel. They are more apt to give up why they are slowing than
have to make up lies or excuses on why they cannot pay.
I: Are there any gaps between your sales & collections department?
53

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