“The world needs another vehicle to get people to pay in cash.” -Suze Orman
Distributors work hard to grow sales. You fight for more shelf space, an additional facing in the cooler, and another display in the store.
However, you may neglect to do the work needed to collect on the sale.
Your beer business provides excellent products and service and deserves to be paid as agreed and on time. You’re not a bank. You are not in the business of loaning money, but in a sense that is what distributors do when beer is sold on credit – it is a loan of money (in the form of product) to the retailer.
In this article we’ll cover three keys to faster cash collections so you can put more money in the bank. Making the sale is important. Collecting the cash is vital.
Three keys to faster cash collections
- Good Collection Practice = Good Customer Service
- How to read the Accounts Receivable aging report
- Train your team how to collect money: Use the magic One Sentence Collection Technique
Collections Basics
First, let’s cover some basic terminology.
Accounts receivable (A/R) are sales you’ve made to customers that you haven’t collected yet. In other words, A/R is uncollected cash.
The A/R aging report is a detailed listing of all the accounts that still owe you money. The report lists the customer name, amount and date of the unpaid invoice.
The ‘aging’ part refers to how old the invoices are. This way, you can quickly see if any invoices are overdue. In the example below, the customer is listed in the first column, followed by the ‘aging buckets’ 1-15 days old, 16-30 days old and so on. Anything older than the allowed credit terms for the customer is overdue.
You’ve sold and delivered the beer, but some customers haven’t paid yet. The A/R aging gives you a full reporting of who hasn’t paid, and how much they owe. It is the bible for what comes next: Collecting the Cash.
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Key #1: Good Collection Practice = Good Customer Service
Collections is a customer service issue. How well or poorly you manage your accounts receivable and collections process will play a big role in how the customer feels about your company.
If your A/R is a mess the customer won’t understand their billing statement, and they won’t pay.
Sloppy A/R reflects poorly on your business. The customer will be frustrated and so will your bank account. Worst of all, cash will stay on the A/R aging uncollected.
Likewise, if your A/R is well-organized, and clearly communicated both customer and bank account will be happy.
Customers expect great service and great products. They expect timely deliveries and a smooth transaction when paying their bill. Well-managed and organized customer invoices and A/R is important in delivering an excellent customer service experience.
Key #2: Train Your Team to Read the Aging Report
As noted above, the A/R aging report is the bible of collections. This report shows you everything you need to know about who owes money and how much. However, you need to know how to read the report before you can hope to collect the cash.
It seems obvious enough, but in my time I’ve seen hundreds of employees who did not know how to read an A/R aging report. These same folks were the ones charged with the responsibility to collect money.
Do you have some of these folks in your company? Teach them how to read the A/R bible so that you can improve your cash collections.
That cash isn’t going to collect itself. Do what it takes to teach your people how to read the bible, the A/R aging.
Key #3: Train Your Team to Collect Money
Raise your hand if you’ve taught your sales team how to sell. Now raise your hand if you’ve taught them how to collect money.
If you didn’t raise your hand on that second question you are not alone.
The secret to collecting money boils down to two simple steps:
- Step #1: Read the A/R Aging report
- Step #2: Ask the customer for the check
If your sales team has collections responsibility, insist that this be part of the sales process. Before walking into the account, the salesperson reads the aging and determines if the customer has invoices that need to be paid. If a payment is due, train your salesperson to ask for the check.
Not surprisingly, many customers will not pay you unless you ask for the check.
“I need to grab a check from you today.” A simple request can go a long way towards improving your cash collections.
The secret to collecting cash: Read the aging + Ask for the check.
Wrap up + Action Items
You work hard for every sales dollar in your distribution business. Now work just as hard to make sure you get paid and speed up the collection of your accounts receivable.
The three Keys to Speed Up A/R Collections:
- Remember that a good A/R process = good customer service
- Teach your employees how to read the A/R aging (the cash bible)
- Teach your employees how to collect money: #1 Read the aging, #2 Ask for the check
Use the keys and get those dollar bills off your A/R aging and into your bank account.
Yours in Collecting Cash,
Kary
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