In my last post, we discussed the importance of profit and I gave you several different strategies to create profit improvement. Let’s review some of the concepts that we have discussesd so far:
- Increasing prices of products and services
- Selling more to each customer during each transaction
- Monitoring and decreasing costs of products and services
Now, let’s discuss another source of profit improvement for most businesses that can be found in improved collections. Many different types of businesses suffer greatly from accumulated past due account receivables.
Personally I have never let that problem develop in any of my businesses, even those that by their normal nature must give credit to get business. I firmly believe that the sale isn’t made until you get paid.
Effective marketing strategies can, to a great degree, prevent the build up of unwieldy receivables. Discounts or premiums for advance or prompt payments work extremely well. However, if you do have or ever develop a receivables problem I urge you to take aggressive speedy action to clean it up and get it back under control. Preserving rapport with a client or customer who can’t or won’t pay his bills is of little value and left alone collection problems tend to get worse not better.
In today’s business environment even large, long established, well respected corporations can and do find themselves in trouble and then in bankruptcy. In that situation you as a creditor could wait years for your money and then recover only a percentage of it.
There are many vendors out there who never gave a second thought to extending credit to such firms as General Motors or AIG but they should have. My companies are successful in getting Fortune 500 corporations, professionals, customers with long standing relationships with us as well as new customers and even government agencies to pay in advance for their goods and services. Everybody tells me why it can be done while we’re doing it.
I think one of the most important lessons that I’ve learned from restoring troubled businesses to health is that trends rarely reverse themselves. Trends don’t change people, change trends. Waiting, procrastinating, delaying action on a problem or a negative situation is almost always an error. Problems don’t seem to improve with age nor do they go away on their own.
The excellence idea, a bias for action, applies to negative as well as positive situations to reactive, as well as proactive behavior. When you get the first glimmer of something not right in your business that’s the time to look closer and to take corrective action.
I think some business people spot the tip of a problem and choose to ignore it, feeling they’ve got enough to handle already, why go looking for trouble? I’m told that in the Chinese language the symbol for trouble and crisis is the same symbol used for opportunity. That shows incredible wisdom on their part.
Most of the significant improvements in my businesses are byproducts of problems that reared their ugly heads often at the worst possible times. In Think and Grow Rich, Napoleon Hill wrote, “In every adversity lies the seed of an equal or greater opportunity.” That’s an idea that could help every business be more successful and every businessperson be more productive.
It’s a funny thing how closely related failure and success are and how failure is usually the womb of a subsequent success. Most business problems, incidentally, have marketing related solutions. To be very simplistic, sales solves most problems. Less simplistically, but valid in my experience, is that the success of a business is closely related to how much time, energy and money it’s leaders can direct to marketing versus how much is consumed by internal problems.
You need not only a bias for action but a bias for sales in your business. A bias for selling is a determination that the other aspects and responsibilities of running a business will not be permitted to get in the way of the sales and marketing process.