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Connie Sue Centrella, MBA National Plasterers Council New Orleans February 5, 2010

Effective Collection Techniques “It’s YOUR Money”. Connie Sue Centrella, MBA National Plasterers Council New Orleans February 5, 2010. Warren Buffett. You don’t know who is swimming naked until the tide goes out. Learning Objectives. The economy may affect our business but not our mind.

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Connie Sue Centrella, MBA National Plasterers Council New Orleans February 5, 2010

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  1. Effective Collection Techniques “It’s YOUR Money” Connie Sue Centrella, MBA National Plasterers Council New Orleans February 5, 2010

  2. Warren Buffett You don’t know who is swimming naked until the tide goes out

  3. Learning Objectives

  4. The economy may affect our business but not our mind. We need to rearrange our mind to affect this change.

  5. New Rules for Contractors 1. Cash efficiency 2. Management intensity 3. Ground level intelligence 4. Frequency of control

  6. Change in Consumer Behavior

  7. Change in Customer Percent of Population over 50 1970 24.4% 2010 32.4% Traditional Families (Ozzie and Harriett) 60% of the U.S. labor force Today only 15% of the U.S. labor force Two-Income Families 20% of the U.S. labor force Today 40% of the U.S. labor force

  8. Women in the Work Force In 1950 36.7% of women ages 20 to 64 were in the workforce. In 2005, 75.2 percent of women in that age group hold down jobs. Few retailers have yet to address the needs of working women.

  9. Ethically Diverse 1980 19.7% were Hispanics, Asians and blacks 2010 33% of U.S. population Our tastes in food, music and fashion have already changed dramatically as a result of the increasing ethnic influences on society

  10. The Way We Are Today

  11. Collections have also changed Credit Cards Open Accounts Consumers are more transient Consumers are more demanding

  12. Cash Efficiency • Collect as much as possible • As soon as possible • Without losing customer • Other contractors require payment when work is performed, why don’t we?

  13. Concerns • Fear of losing customer • Afraid of asking for the money • Payment increases your cash flow • Lack of payment is worse!

  14. Example • Sale $1000 100% • Labor 300 30% • Materials 300 30% • Overhead 30030% • Profit $ 100 10% • Write off $1000 comes off bottom line,

  15. New Sales? To Cover Loss? • $10,000

  16. Time value of money Shrinking credit dollar $1.00 30 days past due = $.97 60 days past due = $.90 90 days past due = $.83 120 days past due = $.75 One year past due = $.45

  17. Revenues and Receivables Sales of Goods And Services Activity Operating Revenues Income Statement Cash Accts. Rec. Balance Sheet Cash Received From Customers Cash Flow Statement

  18. Average Collection Time Receivables/Sales/365 days Example: $50,000/$500,000 X 365 days = 36.5 days Change billing to meet payment cycle of consumer Collection Ratio

  19. Billing cycle Make sure to always work this cycle in “your favor” Ask the questions that will work out the answer

  20. Questions? How frequently do you send invoices? Do you have correct billing address? Are they sent to the correct person? Are you invoices clear and legible? Have you considered electronic? Is due date clear? Can you clearly see how much to pay? Are your invoices accurate?

  21. Internal collection policy • A written policy • Specific date for invoicing • Same day is best or next day • When payment is one day past due, • send a notice, • the longer you wait, the longer to get paid • Let staff know policy • Decide when to turn over for collection. • Place your collection policy on your bills

  22. Place Collection Policy on Invoice • When payment is expected • Explain late fees and % • Tell customer time to be turned over for collection • Give contact and phone number of accounting staff.

  23. Your cash flow Once you have established the billing cycle make sure to monitor (KEEP YOUR EYE ON) the account Remember Holidays!

  24. Categorizing your customers What is this ????

  25. How your customers pay • A/B Customers • Always pays on time • Low maintenance • Well informed • C/D Customers • Always pays late • High maintenance • Hard to reach • Always haggles • Disorganized

  26. Credit Cards? Considered charge card accounts Include form in contract packet for authorization Set up monthly billing

  27. Your attitude will make a difference Be persistent.. But kind Show understanding but get your payment Yelling, screaming, demanding will just anger the customer If you are wrong, then correct it immediately

  28. Collection ideas • Offer cash discount on service contracts – 2% 10 days • Remember to add into cost of service • Keep records of times of service • Leave a door hanger each service

  29. COLLECTIONS Calls The sound of your voice Follow–up If you said you were going to call….CALL! Letters Reminder Demand Visits Knock! Knock!

  30. More collection ideas • “Confidential and Personal” • Put on outside of envelope • “Return receipt requested”, • Must have in case of legal action • “Post dated checks” • Turns a cash payment into a receivable • In reality you have extended the customer credit

  31. Poor Ways to Ask for Payment “Is there a problem?” Willing to settle for no reason Negotiate for payment terms Never say “don’t worry about it, they won’t Don’t tell customer you need the money, they don’t care

  32. Excuses • “I never got your bill” • “We never approved work” • Have it in writing before job begins • “I have other bills to pay” • “My husband handles the bills” • “The check is in the mail” • “Sue me”

  33. You must collect your money!! Cash is vital for your business success No cash, no business!

  34. FDCPAFair Debt Collection Practices Act • Designed to eliminate abuse and deception • Unfair debt collection practices • Protect consumers from abuses in debt collection • Applies to collect of debt incurred by consumer • Personal, family or household purposes • Applies to debt collectors • Retail owners should abide by same rules

  35. Prohibited Practices • Threaten to use violence to harm consumer or their property • Use of obscene, profane or other language that is abusive • Publish a list of consumers who refuse to pay • Advertise a debt for sale to coerce payment • Annoy, abuse or harass persons by repeatedly calling or allowing phone to ring continually • Make calls without properly identifying caller

  36. How to Collect a DebtIn House Debt Collections • Clearly written policy • Payment date expected, late fees, cost if collection is turned over to a collection agency • Terms fully spelled out in writing • Invoice states specific Due Date • Don’t use Payable in 30 days • Avoid aging buckets on billing statement • Conveys expectation that balance is going to age • Trains consumer to pay amount later or making partial payments

  37. Written Internal Collection Procedures • Consistent and clean internal collection practices • Select person responsible for collections • Statement date • Reminder letters, • Phone calls • Systematic plan for following past dues

  38. Using Debt Collection Agency • Determine time and money to do-it-yourself • Internal debt collection may be cost prohibitive • After 90 days, accounts depreciate at 15% per month • Huge resource drain to spend 90% of time chasing 5-10% of customer base • Outsourcing may be less expensive. • Look at lost opportunity dollars • Core business functions cost to chase bad accounts

  39. The Business Relationship • Building the relationship right from the beginning • Clear understanding of the commitment by both parties

  40. Check List for Contractors • Payment arrangements made clear before job or product is sold • How will payment be made • Check, cash, credit card, on account • Credit application by owner • Credit limit set

  41. Pool Professionals Insist on a Contract for every job performed

  42. Be Professional • Insist on a contract!! • Shows work to be performed • Shows payment schedule • Shows responsibilities of both parties • Must be sign by both parties and dated!

  43. Using a contract • Why should you consider using one? • Gathering the Info • You are a Professional!

  44. Include in the contract • Names, Dates, Time • Phones (Emergency contact) • Liabilities • Acts of Nature • Loss Days • Legal • Cancellation Procedures • Others

  45. Every JOB ~Get it in writing! • New Construction • Renovations/ re-surfacing • Repairs • Lights, pumps, motor, skimmers, etc. • Upgrades • Equipments • Rails • Slides • Avoid the headaches!

  46. Customer set-upFitting your customer to the right contract! • Using a contract • Gathering the Info • Cost of Service • Billing • Terms & Conditions • Additional billing • Cancellation

  47. Constant Communication • Remain in communication • Expect payment at end of each phase • Stop work if not paid!! • (our biggest failure) • Job gets ahead of payments • Owner gets ahead of us

  48. Written Change Orders • Stop job to get approval from owner of any changes from original contract • Discuss with owner and let them know the additional amount • Don’t wait until the end of the job

  49. We’re not perfect • If there is a mistake on the job, correct it immediately and let the customer know of the issue • Don’t try to hide it, • If you owe customer credit, do it during the construction phase, • Waiting til the end, customer will find more reasons not to pay

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