Tag Archives: business practices

business practices

The Year In Review: Take Inventory Of Business Practices That Can Help The Bottom Line

As 2012 comes to a close, many of us begin thinking about personal resolutions we’d like to make and the things we would like to improve upon in the coming year. This time of reflection is also valuable for business owners and entrepreneurs. The year’s end is a good time to also examine a company’s business practices, policies and operations, and to consider changes that may help increase growth, improve efficiencies and contribute to a company’s future success.

The first step is looking at results and data from the current year to determine the effectiveness of current practices, systems and customer relations. Ask yourself what changes and improvements the company can make to improve operations and increase cash flow.

Review company policies and practices

Begin by reviewing your company’s credit, sales and collection policies. Look at each area, and identify ways you can potentially improve your process, so it can run more efficiently and profitably. Analyze daily tasks from start to finish, and ask questions. Can you centralize a process by product, task or client? Which makes more sense and improves efficiency?

Then, once you fine-tune the process, document it. Develop an internal procedure and policy manual for employees to refer to and update as needed. This will streamline your internal and external practices and improve the consistency in delivery of your product or service, which will help improve profits.

Review your customer’s payment efficiency

Do you know how to evaluate if your clients are profitable? It’s important to evaluate how your team’s time is being spent. Some clients are more demanding and, thus, require more time. If this is the case, are you charging for the additional attention or is the client actually costing your firm time and money? In some cases, it may be more cost effective to resign the account.

To help determine the profitability of a client, track the average hours spent on each client per month, and review this on a quarterly basis. Doing so can quickly uncover high-maintenance clients and allow management the opportunity to review pricing to determine if the required yield is being met. After all expenses are allocated and subtracted from the revenue from each client, it is easy to then conduct a comparison of the clients and evaluate each quarter.

Review your receivables

If your customers are taking too long to pay, or accumulating outstanding invoices, this is costing your company money. If the problem is consistent, don’t shy from using collection outsourcing companies or agencies to get the monies owed. While an outside agency will charge for its services, the alternative may be lower collection rates, higher borrowing and bad debt write-offs.

Looking back will move you forward

Reflecting on 2012 allows businesses to celebrate the year’s successes and provides the opportunity to seek out solutions for working smarter and more profitably. After collecting the necessary data and assessing your company’s policies and practices, think about what you can do better for your business in 2013. While sometimes drastic changes may be what it takes to turn your business around, sometimes simply an increased awareness of the inner workings of your company can make all of the difference.

For more information on reviewing business practices, visit fswfunding.com.

Business Credit Score

Protect Your Business Credit Score, Improve Business Policies

Most people know that how you manage your personal finances directly impacts your credit, but many don’t realize that proper management of your business financials is significant for protecting your company credit standing and ultimately a company’s growth and success. Just as a poor credit score can make it difficult for you to get a home or auto loan, it can influence the decision on a business loan or even the opportunity to lease office space. Maintaining a good credit score can be difficult for startups and small businesses that rely on payment for products or services.

Fortunately, there are ways to protect your company’s credit. At the core of it all, companies need to focus on receiving payments on time and keeping a reasonable amount of cash on hand to cover expenses. Enlisting staff support and making them aware of how to handle billing and payment inquiries and proper collection procedures can have a direct and positive impact on the company’s credit scores.

Create and enforce business policies

If you don’t have internal policies in place already, consider developing specific business practices that promote prompt and timely payments from your customers or vendors. Work with staff members and even key customers to eliminate issues in your organization that may adversely impact cash flow, including limiting the way your business takes payments.

When customers are consistently paying late or not paying altogether, consider automating the identification of delinquent accounts based on a formula of the customer’s credit rating, payment histories and buying patterns. This will allow you to manage the company’s accounts receivable investment more effectively.

In difficult situations, credit lines and payments can be worked out collaboratively with the customer to achieve the objectives of both parties. This may require creativity on the part of the credit manager and use of security, documentary and other credit management tools. Credit policy should be a tool used to expand company revenues as well as the customer relationship.

Provide proper training

Provide training across all departments that interact with clients or customers to ensure understanding of your company’s policies and objectives. Ensure all members of your organization provide a consistent message to the outside world, and anyone working in a customer service role knows how to answer questions about payment, deduction, dispute or credit-related problem. This can help eliminate payment delays by a customer waiting on callbacks and emails from the accounts receivable department.

When to start collecting

Use a credit and payment scoring model that triggers workflow actions. The scores should reflect credit risk and industry payment data, as well as your own experience with a customer to estimate a time for your company to begin collection action.

Be sure that collection performance goals are written down and that your staff are held accountable for their results. The goals should be in sync with those that drive senior levels of management but focus on more targeted metrics to draw team concentration to what’s important.

Partnering with outside agencies

Don’t shy from using collection outsourcing companies or agencies. While they will charge for their services, the alternative may be lower collection rates, higher borrowing and bad debt write-offs. This prioritization must be by employee as well, as some are better suited for volume collections as opposed to complex collections.

If your business is experiencing an unacceptably high level of bad debt, perhaps your credit processes are inadequate to the task. Another possibility is credit insurance, although a credit insurer will also require that you implement effective credit controls and policies. If you have tried improving your business with the steps suggested above, you may find it more beneficial to try turnkey solutions, including credit and collection outsourcing or even factoring.

For more information about how to improve your credit score and your chances at attaining a business loan, visit fswfunding.com.