There Is A New Sheriff in Town, And His Name Is Recession1 Oct, 2001 By: Ronelle Ingram imageSource
There Is A New Sheriff in Town, And His Name Is Recession
down turn, market adjustment, slowing of the economy; call it what you want, the
economy is tightening up. Creative businesses can see a positive aspect to this
fiscal cloud of doom.
past few years have shown that the free flow of money allows businesses to be a
little more lenient on prompt collection of accounts payable. New customers are
extended instant credit. Delinquent accounts are allowed to stretch out to 60 to
90 days past due. Demo equipment has been allowed to stay a few extra weeks.
Many small business owners have been working in an atmosphere of employees
having a great deal of power. Low unemployment rates have resulted in excessive
wages, job-hopping, additional soft benefits, and a general sense of the
employee being in charge. There is no longer a feeding frenzy for employees.
2001 is the year of job cuts, not stock options. How can both the employer and
employee gain from the return swing of the economic pendulum?
A Business Point Of View
your receivables; many of your customers are having “cash flow”
problems. A 90 day past due account may file for bankruptcy or close their
doors before you are paid.
your company takes credit cards, always ask a past due customer if they want
to use a credit card to make their account current. Many customers will pay
for a past due service agreement or even purchase new equipment with their
plastic. If your company does not accept credit cards, apply to be a credit
entrepreneurial companies must show a profit to stay in business. A company or
individual that does not pay their bills is not a customer. They are a thief. Do
not do business with known criminals. Your employees will stop coming to work if
you do not pay them. Treat your non-paying customers similarly.
district attorney offices have programs that work directly with businesses that
receive checks that “bounce.” The D.A.’s office will contact the issuer of
the bad check. Options for not prosecuting the offender are offered if full
payment is made. An official notice and threat of prosecution sent directly from
the Office of the District Attorney is a power force in attracting the attention
of wayward non-payers.
to the business sense of your slow pay customers. “Times are tight, payment is
required upon receipt of invoice.” Refuse to provide service or to send
product until payment is received. When service is requested, offer to have the
technician pickup the past due check. Before dispatching the tech, require the
customer to furnish the check number and amount. For the customers with a
history of not having the check signed when the tech arrives, require the
customer to fax over a copy of the signed check.
accurate records of customer’s payment histories and follow-up calls made by
your accounts receivable personnel. A clear picture of their payment histories
will appear. The customer who is a chronic slow payer is a drain on your
company’s resources. Be polite, but be firm.
a second look at all those invoices that are under $50. National surveys
repeatedly quote the cost (to your company) of processing a single invoice
ranges form $20 to $40. You cannot afford to invoice a customer for a single $10
cartridge of toner. Consider an additional small order charge, or minimum order.
invoicing of low-end maintenance agreements actually cost more money than you
are making. A $300 per year service agreement billed monthly, will require
twelve individual invoices for $25 each. Using the low end of the survey’s
cost of $20 per invoice, it will cost your dealership $240 (12 months, times
$20) in overhead cost just to invoice and process these payments. That leaves
you with $60 to cover the entire cost of servicing the equipment for one year.
service departments should strive for a profit margin of 30% to 40%. Using this
logic, a reasonable acceptable profit on a $300 service agreement should be
$180. No service manager or company owner should agree to sell a service
agreement that is guaranteed to lose money over the course of the year.
logic is often countered by company owners stating, “We have a full time
bookkeeper who takes care of all this. She has plenty of time to follow-up.
Invoicing is done automatically by our computer system.”
your company would not need a full time bookkeeper if you were not sending out
hundred’s of $10 invoices. How many phone calls, faxes, and first class
letters are required to receive payment? There are some businesses (people) that
you cannot afford to have as customers.
The Employee Point Of View
should return to the employee side of your business. Current employees will
think twice before leaving the security of their known job for an unknown new
employer. Wages being offered by employers looking for additional personnel are
becoming a little more realistic.
need to train from within can be done with less fear that the newly certified
employee will jump ship. On going training makes an employee more productive. A
smarter worker can accomplish their job with less stress.
sponsored education can be your greatest fringe benefit. Employees who know
ongoing training is part of company’s philosophy are more likely to be
long-term employees. As part of your yearly budget, put together a line item for
employee training. Ask employees to suggest appropriate goals for needed
training. Some of your current employees may be well suited to do much of this
advanced training. Set aside assigned times for ongoing training. Those who
train usually learn more than those that are being trained. During a business
slow down is the ideal time to step up training. As we enter into summer, a
traditional slower time for service, fill those hours with planned training.
For Business Owners
business owners have shared their on going profits with reduced work loads.
“The digital equipment is working better. We have fewer service calls. Do I
start firing employees?”
long as the incoming revenue is there to support your current staff, “Don’t
throw the baby out with the bathwater.” Now is the perfect time to take on a
new product line or expand your servicing territory. The traditional copier
dealer can consider expanding into printers, fax, wide format, color, shredders,
network services, office furniture, etc.
pricing “summertime specials” can be offered for Preventive Maintenance
servicing. Techs can handout fliers to your existing customers offering new
products or services. Fliers announcing new products can be sent out with each
regularly sent invoice. Any time you fax a customer a document, send along a
one-page flier offering a new product or special pricing.
the economy slows down, responsible business people must double their efforts to
encourage your customers to increase the business they do with you. Aggressive
sales offerings can be made with no increase to your advertising budget.
one of your employees can do a little extra promotion of the products and
services your company provides. You must be the one to kick start a new program,
contest, or incentive plan. Strive to involve every employee in keeping the
momentum on an upward trend.
because the national economy is on a downward slump does not mean your company
must following the loosing track. In the worst of depressions, some companies
manage to rise above the rest.
will take more planning, and extra effort to stay ahead of the competition and
the stock market curve, but it can be done. It is your responsibility to get the
“New Sheriffs” six shooters pointing in the right direction. Aim your
company’s sights on the opportunities of the changing economy. Actively take
advantage on the downward economy.