Top 12 Accounts Receivable Best Practices For Smaller Companies
In an ideal situation, purchase and payment are simultaneous, but in a modern “trade credit” economy, in order to keep customers and grow your business you need to offer credit terms. Even with the buyer’s agreement on when payment is supposed to be due, payments will often lag, putting a dent in your cash flow or worse, forcing you to increase borrowing to maintain operations. Poor accounts receivable practices equal poor cash flow, so putting some or all of these basic suggestions into practice can help your bottom line. It's that simple.
1. Credit Management: It’s surprising how many smaller companies are penny wise and pound-foolish. They will try to save the $30-$50 cost of a legitimate credit report, either by doing nothing at all and hoping for the best, or relying on cut-rate Internet services costing (and usually worth no more than) a couple of dollars. This is like rolling the dice: sometimes it works out, but when it doesn’t, a multi-thousand dollar bad debt can ensue. In the long-term, it is a strategy destined for failure.
2. Shorten Payment Terms: Forget the 'Net 30' or 'Net 45.' Use 'Payment due upon receipt”, or Cash-in-Advance for problem payers or those with no history with you.
3. Offer Early Payment Discounts: If you do extend trade credit, try a prompt payment cash discount, such as 2%/10 Net 20 Days. Customers want to save a couple bucks, too, and are more inclined to pay up in early if they can get a discount.
4. Enforce Early-Payment Discounts. If you give a discount, whatever you do, don’t get into the habit of letting the customer have the discount and paying late, too.
5. E-Mail Invoices: Using electronic billing or email, deliver invoices to customers instantly. You can also ask them for a confirmation of payment date in the email.
6. Offer Electronic Payment Options: Make sure you take payment via electronic funds transfer -- include your EFT banking information (bank, branch and account number) on your invoices. Be flexible: accept PayPal and credit cards, too.
7. Collection Management: Phone, Phone, Phone: Don't be lazy, pick up the phone and call delinquent accounts directly because the personal touch -- if handled professionally -- is much more effective than e-mail and letters. To get even better results in the future, call back to let the customer know you received the payment. They will remember that.
8. Accounts Receivable Management: Monitor all accounts receivable at least on a weekly basis and follow up on those customers when due, or in the case of very large invoices, a few days ahead of the due date as a friendly reminder to them that it is important to you.
9. Keep Records: Although this should be obvious, keep a running record of all contacts, including e-mails sent, phone calls made, and customer responses received.
10. Systems. Look at credit and accounts receivable tracking and workflow systems that help you manage the entire credit to payment cycle. A well-designed system will ensure that nothing slips through the cracks. There are a number of Internet based systems for all sizes of companies.
11. Professional Outsourcing. Call in a professional credit and accounts receivable outsourcing service. You will save you money, credit losses, and overhead in the long-term. Plus, you know that the job will get done without all the management hassles.
12. If All Else Fails. Before an overdue account turns into a bad debt, contact a Collection Agency. Forget about selling to that customer again, unless it's cash up front, but then again, customers that don't pay are not customers you need.
Smyyth LLC -- since 1906
Order-to-Cash Services and Technology
Smyyth provides Order-to-Cash Outsourcing, Services and Technology. Credit services include credit groups, reporting and scoring, and trade credit insurance. Outsourcing includes management of credit, accounts receivable, collections, deduction management, and profit recovery. Our Carixa Internet technology streamlines operations, slashes costs, and increases your profits. Built on Six Sigma principles and SAS 70 Certified.
For more information: Visit www.smyyth.com
© Smyyth LLC 2011
Monday, September 19, 2011
Tuesday, September 13, 2011
Amazon Deal With California
When Amazon.com threatened to fund a public referendum to overturn California's online tax law that would collect sales tax on online purchases by defining Amazon 'affiliates' as a sales presence in the state, the state compromised by giving a one-year delay in implementing sales tax collection if Amazon dropped its threatened campaign.
Mail order and online companies are not required to collect sales tax on purchases from states where the company does not have a 'physical presence' -- store, warehouse, sales office, and so on. States, which are losing out on an estimated $23 billion in tax collections per year, are defining 'affiliates' -- websites that get paid a commission for every item sold by Amazon via links on the those websites -- as presences. Amazon happens to be the largest online player, but other companies do the same thing and will be subject to sales tax collection.
Retailers assert forcing online companies to collect sales tax would level the selling playing field. Online companies point to a 1992 US Supreme Court decision, Quill Corp. vs. North Dakota, which found that forcing a company with no physical presence in the state to pay sales tax violated constitutional provisions barring interference with interstate commerce.
Amazon's agreement with California -- and you can bet more states will pass such a tax law -- contains the provision that Congress could pass a national sales tax law to supercede state laws in 2012. Such national efforts failed before, and given the bipolar bipartisanship of the current Congress, it seems unlikely a national law could be passed.
Mail order and online companies are not required to collect sales tax on purchases from states where the company does not have a 'physical presence' -- store, warehouse, sales office, and so on. States, which are losing out on an estimated $23 billion in tax collections per year, are defining 'affiliates' -- websites that get paid a commission for every item sold by Amazon via links on the those websites -- as presences. Amazon happens to be the largest online player, but other companies do the same thing and will be subject to sales tax collection.
Retailers assert forcing online companies to collect sales tax would level the selling playing field. Online companies point to a 1992 US Supreme Court decision, Quill Corp. vs. North Dakota, which found that forcing a company with no physical presence in the state to pay sales tax violated constitutional provisions barring interference with interstate commerce.
Amazon's agreement with California -- and you can bet more states will pass such a tax law -- contains the provision that Congress could pass a national sales tax law to supercede state laws in 2012. Such national efforts failed before, and given the bipolar bipartisanship of the current Congress, it seems unlikely a national law could be passed.
A&P Auditing
Great Atlantic & Pacific Tea Company filed with the US Bankruptcy Court on September 12, 2011 a motion to expand the scope of employment of PricewaterhouseCoopers as auditor to include audit services.
Borders Severance Payments
The US Bankruptcy Court on September 8, 2011 signed off on an order that allows the book seller to pay executives Mike Edwards, Scott Henry, Jim Frering, and Rosalind Thompson $125,000 each — the maximum payment allowed under the Bankruptcy Code.
NumBytes 58: Google Power
Google consumed a whopping 2.26 terrawatt hours of electricity in 2010 -- enough to power 200,000 average US homes. They promise to only use that power for good.
Google Advice
Google Industry Director for Retail Todd Pollak, at the Shop.org conference, offered some pointers for retailers seeking to bridge the gulf between bricks and clicks. He suggested retailers commit to turning their company into a single profit center instead of a number of competing fiefdoms because customers don't care about divisions, they just see one single company. Google testing found that closer integration of website and store results in more store visits and sales.
He also contended that retailers need continuous testing of their sites to smooth customer use, even to the extent of studying how customers purchase different items. He asserted the 'one size fits all' interface does not work as well as customized approaches among different products because customers do not buy apparel the same way they buy small appliances or toys or any other product. Finally, Pollak recommended compiling stats on a per customer instead of per channel basis to better cater to customer habits.
He also contended that retailers need continuous testing of their sites to smooth customer use, even to the extent of studying how customers purchase different items. He asserted the 'one size fits all' interface does not work as well as customized approaches among different products because customers do not buy apparel the same way they buy small appliances or toys or any other product. Finally, Pollak recommended compiling stats on a per customer instead of per channel basis to better cater to customer habits.
Monday, September 12, 2011
Disney Retail Strategy Shift
Walt Disney Co. restructured to combine its separate DVDs, toys, apparel, and video games into a single Disney Consumer Products group in effort to boost sagging DVD sales and retain shelf space at major retailers. The company also named Robert Chapek as president of the new division.
BJ's Sale Approved
BJ's Wholesale Club, Inc. reported holders of approximately 72% of the company’s outstanding common stock approved the sale of the company to affiliates of Leonard Green & Partners, LP and funds advised by CVC Capital Partners and 0.4% opposed the sale. BJ's expects the closing of the merger will occur on or about September 30, 2011. Stockholders will receive $51.25 in cash, without interest and less any applicable withholding taxes, for each share of the company’s common stock. BJ’s Wholesale Club continues to operate 190 warehouse clubs in 15 states.
Burlington Coat Credit
Burlington Coat Factory Investments Holdings, Inc. and its operating subsidiaries entered into a Second Amended and Restated Credit Agreement that extended the credit agreement to September 2, 2016, retained commitments of $600 million in the aggregate and under certain conditions may be increased to $900 million, and lowered interest rates and other bank fees for the revolving credit facility.
Burlington Coat's other long term debt had previously been replaced in February 2011 with a new $1.0 billion senior secured term loan facility that matures in 2017 and $450 million aggregate principal amount of 10% Senior Notes due 2019. With the completion of the new Amended Credit Agreement, the company now has no significant debt amortization or maturity over the next five years. The company continues to operate 462 stores in 44 states and Puerto Rico.
Burlington Coat's other long term debt had previously been replaced in February 2011 with a new $1.0 billion senior secured term loan facility that matures in 2017 and $450 million aggregate principal amount of 10% Senior Notes due 2019. With the completion of the new Amended Credit Agreement, the company now has no significant debt amortization or maturity over the next five years. The company continues to operate 462 stores in 44 states and Puerto Rico.
BlueFly Raises $6.5 Million
Bluefly, Inc. raised approximately $6.5 million through the sale of newly issued common stock to entities affiliated with Rho Ventures, Soros Fund Management LLC, and Prentice Capital Management LLC from Bluefly at a market price of $1.80 per share. Rho Ventures is now the largest shareholder, owning approximately 37%, on a fully diluted basis. The cash will be used to promote growth of online presence.
Border's Final Days
The last few days of Border's going-out-of-business sale is upon its 359 remaining locations. All stores will close by mid-September 2011.
NumBytes 57: PO'd
Rain, sleet, and snow may not stop the US mail, but electron storms might. The US Post Office lost $3 billion in the fiscal third quarter as mail volume continued to drop -- off about 25% since 2006 -- and costs continue to rise. Give management credit, it floated a number of money-saving schemes, including laying off 100,000 workers, closing 2500 post offices, and eliminating Saturday delivery. If nothing changes, the US Post Office could lose up to a quarter trillion dollars by 2020...assuming it doesn't go belly up in the process.
Sure Fed Ex and UPS grabbed package delivery market share, but blame the move to e-mail as chief revenue squasher. The Post Office delivers about 48 billion bills, statements, offers, and other such paper mail each year and most of them are continuing the migration to electronic form. In 2010, for the first time, more households reported paying bills online than by check.
The bills still come in the mail, but companies are starting up digital mail services to grab a piece of that electronic bill sending to secure e-mail boxes. Pitney Bowes' Volly, Zumbox's Zumbox, Hearst's Manilla, and Bezos Expeditions' Doxo are all circling while the USPS asserts it is not dead yet and wants to go for a walk. A typical bill costs a company anywhere from 70¢ to $1 to deliver, while Zumbox claims to charge as little as 20 cents per bill. Bill recipients are not charged, just the companies sending the bill.
Of course, the more companies put things online, the greater the chance for a spamfest or hacker intrusion. In fact, given past performance of electronic mail, you can bet on both despite promises of security and opt-out clicks.
The e-storm seems unstoppable. The era of paper correspondence seems all too stoppable.
Sure Fed Ex and UPS grabbed package delivery market share, but blame the move to e-mail as chief revenue squasher. The Post Office delivers about 48 billion bills, statements, offers, and other such paper mail each year and most of them are continuing the migration to electronic form. In 2010, for the first time, more households reported paying bills online than by check.
The bills still come in the mail, but companies are starting up digital mail services to grab a piece of that electronic bill sending to secure e-mail boxes. Pitney Bowes' Volly, Zumbox's Zumbox, Hearst's Manilla, and Bezos Expeditions' Doxo are all circling while the USPS asserts it is not dead yet and wants to go for a walk. A typical bill costs a company anywhere from 70¢ to $1 to deliver, while Zumbox claims to charge as little as 20 cents per bill. Bill recipients are not charged, just the companies sending the bill.
Of course, the more companies put things online, the greater the chance for a spamfest or hacker intrusion. In fact, given past performance of electronic mail, you can bet on both despite promises of security and opt-out clicks.
The e-storm seems unstoppable. The era of paper correspondence seems all too stoppable.
Sears Hires Penkar
Sears Holdings hired Raj Penkar as Senior VP and President, Supply Chain, effective September 15. Mr. Penkar will be accountable for all aspects of the company's supply chain, including logistics, warehousing, inventory management, and distribution.
Bankruptcy Updates
Sbarro
The US Bankruptcy Court on September 8, 2011 approved Sbarro's motion to implement a key employee incentive plan (KEIP), under which total payments can range from $585,000 to $975,000 per measurement period - for a total aggregate cost of $1.17 million to $1.95 million. The Court on September 9, 2011 also approved Sbarro's motion for an order approving and authorizing the Debtors to perform under the exit financing commitment letter with its first lien lenders, approving procedures for consideration of alternative restructuring proposals, scheduling proposal deadlines and an auction, and approving the form and manner of notice thereof. The $18.6 million first-out, delayed-draw term loan facility will be used for general corporate purposes, including to cash collateralize existing or replacement letters of credit.
Nebraska Book Company
The US Bankruptcy Court on September 7, 2011 approved Nebraska Book Company's motion to approve the support agreement between the Debtors, the 8.625% Noteholders, the AcqCo Noteholders, and Weston Presidio. Under the agreement, in exchange for Weston Presidio's support of the Plan, the Debtors have agreed to provide an enhanced package of new warrants.
The US Bankruptcy Court on September 8, 2011 approved Sbarro's motion to implement a key employee incentive plan (KEIP), under which total payments can range from $585,000 to $975,000 per measurement period - for a total aggregate cost of $1.17 million to $1.95 million. The Court on September 9, 2011 also approved Sbarro's motion for an order approving and authorizing the Debtors to perform under the exit financing commitment letter with its first lien lenders, approving procedures for consideration of alternative restructuring proposals, scheduling proposal deadlines and an auction, and approving the form and manner of notice thereof. The $18.6 million first-out, delayed-draw term loan facility will be used for general corporate purposes, including to cash collateralize existing or replacement letters of credit.
Nebraska Book Company
The US Bankruptcy Court on September 7, 2011 approved Nebraska Book Company's motion to approve the support agreement between the Debtors, the 8.625% Noteholders, the AcqCo Noteholders, and Weston Presidio. Under the agreement, in exchange for Weston Presidio's support of the Plan, the Debtors have agreed to provide an enhanced package of new warrants.
Friday, September 2, 2011
Toys R Us, Pop-Ups, And Gluts
Toys R Us, Inc, announced plans to open fewer temporary 'pop-up' holiday stores in 2011 than the 600 it opened in 2010, although the company did not specify exactly how many it would open.
Just as retailers pushed the pop-up trend by finding cheap rents and opening temporary stores -- an estimated 5000 of them opened last year -- so the revival of rents may lead to the downfall of pop-ups. Landlords figured out that pop-up retailers seek the same spaces year after year, and so increased the rents. As more stores compete for prime locations, the pressure grows for rent increases.
In addition, a pop-up glut spreads the wealth as shoppers choose from among many retailers. Halloween offers an excellent example. Where once an area held one or two Halloween pop-up stores, in addition to the usual year-round department, discount, and party stores, last year's deluge of pop-ups created a glut. If retail dollars slow to a trickle, the return from pop-up operations decreases, and even 'defensive' pop-up stores opened by year-round stores to prevent sales from slipping away lose their luster.
Just as retailers pushed the pop-up trend by finding cheap rents and opening temporary stores -- an estimated 5000 of them opened last year -- so the revival of rents may lead to the downfall of pop-ups. Landlords figured out that pop-up retailers seek the same spaces year after year, and so increased the rents. As more stores compete for prime locations, the pressure grows for rent increases.
In addition, a pop-up glut spreads the wealth as shoppers choose from among many retailers. Halloween offers an excellent example. Where once an area held one or two Halloween pop-up stores, in addition to the usual year-round department, discount, and party stores, last year's deluge of pop-ups created a glut. If retail dollars slow to a trickle, the return from pop-up operations decreases, and even 'defensive' pop-up stores opened by year-round stores to prevent sales from slipping away lose their luster.
JC Penney Outlets Out
JC Penney will transfer ownership of its Outlet Stores to SB Capital Acquisitions, LLC within the next 30 to 60 days with no changes to its JC Penney agreement for JC Penney retail. SB Capital plans to continue operating the Outlet Stores as an on-going business and keep the current JC Penney management team and associates in the Outlet Stores. At the time of closing, SB Capital will have no debt on the inventory in the stores and the JC Penney name will change 21 or more months from now.
Malls Vs. Outlets
According to Time, one in 11 store fronts is empty inside traditional enclosed malls, the highest rate in a decade, with rents down to 2006 levels. Outlet malls, however, are booming because shoppers perceive stores within offer more value, even if the less expensive items for sale offer less detail and different levels of quality. The article noted 85% of the items sold at outlet malls were never sold in full-price stores and are not leftover items or goods damaged or returned at first-run, full-price stores -- the products are produced specifically for sale at outlet malls.
Outlets also offer cost advantages to operate versus traditional malls. They put all stores on one level, eliminating requirements for escalators and elevators, and since they are not enclosed, they do not provide heating or air conditioning. These cost savings add up, making rents, including common area assessments, less expensive.
Outlets also offer cost advantages to operate versus traditional malls. They put all stores on one level, eliminating requirements for escalators and elevators, and since they are not enclosed, they do not provide heating or air conditioning. These cost savings add up, making rents, including common area assessments, less expensive.
Hart Into Bankruptcy
On August 30, 2011, Hart Stores, Inc. obtained an initial order for court protection from creditors under the Canadian Companies' Creditors Arrangement Act through September 29, with extensions possible. The retailer, which operates 92 mid-sized department stores throughout Eastern Canada, will be able to borrow $20 million from Wells Fargo Capital Finance Corp. Canada to meet its liquidity requirements, such as paying its staff and suppliers.
Fall Spending
An IBM analytics-based study forecasted that the August through October shopping period will be spectacular for clothing and footwear sales. The study predicted sales of children's apparel to rise 11.1% rise to $2.659 billion, men's apparel up 5.5% to $1.930 billion, footwear up 3.2% to $7.066 billion, and women's apparel up 3.1% to $9.211 billion. Adults are apparently holding back on purchasing for themselves during their back-to-school shopping for the kids. But once the kids are in school, the grown-ups will be looking to treat themselves. Specialty apparel retailers, especially those that cater to teens and young adults, are widely expected to lose sales to discounters and department stores this year, as shoppers look for bargains and deals, noted the study.
NumBytes 56: Waitresses' Revenge $5,753
The Pasco County (FL) sheriff's office charged a waitress at a Mugs 'N Jugs with criminal use of personal identification information, and charged two of the waitress' known associates with scheming to defraud, possession of a card scanning device, and fraudulent use of credit cards. The waitress allegedly used an electronic scanner to skim off card details, her associates used the info to manufacture fake credit cards, and then they went shopping at local retailers. The goods they bought were later sold for cash -- so far only $5,753. That's not much compared to a Bernie Madoff Ponzi scheme, but little alleged crimes like these do add up. Maybe retailers might want to rethink the current practice of not requiring signatures for purchases under $25 or $50. Certainly diners may want to think about tipping their waitresses better.
Books-A-Million Promotions
Books-A-Million Inc. promoted Executive VP and Chief Merchandising Officer Terrance Finley to President and COO and promoted VP Real Estate James Turner to Executive VP Real Estate and Business Development.
Thursday, September 1, 2011
Costco CEO Change
Costco announced announced that CEO Jim Sinegal will step down as Chief Executive Officer effective January 1, 2012 and will be replaced by current President and COO Craig Jelinek.
Economy Watch: Sales, Mortgage, Gas
ICSC Retail Sales Data
The International Council of Shopping Centers and Goldman Sachs reported its chain-store sales index for the week ending on August 27, 2011 posted a tiny increase of 0.1% from the previous week, breaking four consecutive weeks of decline.
For all of August, the ICSC chain store sales index rose by 4.6% based on year-over-year comparable-store sales, matching the July performance. Hurricane Irene's impact was mixed with BJs observing they got a hefty lift to its sales from customers stocking up ahead of the storm, while Macy's, JCP and other apparel retailers were negatively impacted. Overall, ICSC figured sales took a 0.5% to 1.0% hit from the storm.
Mortgage Rates
Bankrate.com reported that the average conforming 30-year fixed mortgage rate fell to 4.37% from last week's 4.41%, according to its weekly national survey ending August 31, 2011. This is the lowest rate since Bankrate started its weekly mortgage survey in September 1985. It also reported that the average 15-year fixed mortgage rate fell to 3.48% from 3.63% last week. The Mortgage Bankers Association reported mortgage applications were down 9.6% compared to the week earlier, with 77.8% of mortgage loans going toward refinancing rather than home purchases.
Gas Prices
The Energy Department announced that for week ending August 29, 2011, the average price of US gasoline rose to $3.627 a gallon from $3.581 per gallon week earlier.
Diesel prices fell to $3.82 from $3.81 last week.
Gas consumption for the first six months of 2011 fell 2% from the same period in 2010, as gas prices hit and surpassed $4 per gallon.
The International Council of Shopping Centers and Goldman Sachs reported its chain-store sales index for the week ending on August 27, 2011 posted a tiny increase of 0.1% from the previous week, breaking four consecutive weeks of decline.
For all of August, the ICSC chain store sales index rose by 4.6% based on year-over-year comparable-store sales, matching the July performance. Hurricane Irene's impact was mixed with BJs observing they got a hefty lift to its sales from customers stocking up ahead of the storm, while Macy's, JCP and other apparel retailers were negatively impacted. Overall, ICSC figured sales took a 0.5% to 1.0% hit from the storm.
Mortgage Rates
Bankrate.com reported that the average conforming 30-year fixed mortgage rate fell to 4.37% from last week's 4.41%, according to its weekly national survey ending August 31, 2011. This is the lowest rate since Bankrate started its weekly mortgage survey in September 1985. It also reported that the average 15-year fixed mortgage rate fell to 3.48% from 3.63% last week. The Mortgage Bankers Association reported mortgage applications were down 9.6% compared to the week earlier, with 77.8% of mortgage loans going toward refinancing rather than home purchases.
Gas Prices
The Energy Department announced that for week ending August 29, 2011, the average price of US gasoline rose to $3.627 a gallon from $3.581 per gallon week earlier.
Diesel prices fell to $3.82 from $3.81 last week.
Gas consumption for the first six months of 2011 fell 2% from the same period in 2010, as gas prices hit and surpassed $4 per gallon.
Sbarro Objection Filed
The US Trustee assigned to the Sbarro case filed with the US Bankruptcy Court on August 31, 2011 an objection to the Debtors' motion for approval of a key employee incentive plan. According to the Trustee, 'the Debtors fail to include vital financial information without which it is impossible for the Court, creditors or the United States Trustee to determine if the Bonus Motion is an incentive program, or merely a program that rewards the participants for remaining employed with the Debtors.'
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