The importance of credit management/accounts receivable in your marketing program

By Kim Radok MICM CCE*

How do you market the concept that you are prepared to protect your business’s assets and cashflow, without down grading the positive image of your business projected by your marketing and sales departments?

Introduction

Image and perceptions mean everything in business. We currently live in an age where everything is visible and there is nowhere to hide our secrets. Despite all the current evidence supporting these facts, I rarely see signs that management is understanding this point.

When it comes to marketing and sales, Australian management also appears to rarely, if ever, learn the lesson, “a sale is not a sale until the money is in their business’s bank account and for six months and one day after receipt.” I fear this lesson, unfortunately is about to be learnt in the coming months and years.

One version of marketing reads something like: Marketing refers to activities a company undertakes to promote the selling of a product or service. Marketing includes advertising, selling, and offering products or services to consumers, (retail) or other businesses, (business-to-business).

When it comes to marketing a business today, management must understand that image and perception cover the “whole of business experience.” Having just great products or services, simply is not enough. Your business also needs to know that every interaction “sells’ an image of the business and their representative(s), irrespective of whether that image/perception be good or bad.

Likewise, customer service is no longer perceived as just involving selling. It encompasses the processes relating to every invoice raised, queried or unpaid. Therefore, the

“When it comes to marketing and sales, Australian management also appears to rarely, if ever, learn the lesson, “a sale is not a sale until the money is in their business’s bank account and for six months and one day after receipt.””

“...customer service is no longer perceived as just involving selling. It encompasses the processes relating to every invoice raised, queried or unpaid. Therefore, the reality of what image means and is; also extends to your credit and accounts receivable departments.”

reality of what image means and is; also extends to your credit and accounts receivable departments. Consequently, the actions and behaviour of your credit/accounts receivable departments always has– and always will be of extreme importance.

The following article draws on the information from a radio interview conducted by Business Essentials Daily titled Daily Digital V Personal Touch with Barry Urqhart.

Barry Urqhart is an internationally recognised and respected conference keynote speaker, workshop facilitator, business strategist and consumer behaviour analyst. More details are available on his website http://www. marketingfocus.net.au.

Background

When a business is started, creating a positive, efficient team environment is essential because this is what their customers will experience. In this organisational format, each area and all employees are respected, accepted and trusted to exhibit their own professional skillsets, to enable a positive perception of the business as a whole.

In a command and control model of years past the instructions were issued by the board/senior managers and then each team within the business was expected to deploy these instructions with little question/input.

Today, regretfully, we still see too many organisations reveal this same hierarchal structure and thinking. Often credit and the significant investment a firm has in it’s receivables is overlooked and undervalued and in my opinion, are not receiving the attention they deserve. As a result, the value and ability they have to maximising the organisation’s results are compromised.

The problem with this outdated historical version approach, (still evident today) is that when recession takes hold of the world, this structure will not be sustainable. The fact is that we are going to see many such businesses follow those who have already become insolvent and closed down – due to broken link/s in the company’s infrastructure. Each department, from purchasing through to credit management have vital roles to play. When shared importance is not recognised, valued and respected, trouble is imminent.

Marketing, credit and accounts receivable in the future

To start, here are three sets of questions and answers from Mr Urqhart’s interview. Q We know that good strong relationships are fundamental to business success and is imperative to build relationships across as many channels as possible, but could COVID-19 have put a dent on customers really feeling the love? A He says digital tools may have made it easier to buy from you, but they don’t cater much at all, ➤

for the personal touch and that’s where business can lose out over time”. Q … “Whether COVID-19 has made it even more difficult to maintain those relationships?” A “Yes, it has been for one simple reason, relationships are about interaction. It’s about trust and empathy, understanding, caring and compassion. And when you are socially isolated you are removed from a lot of the emotional queues of relationships and relationships are built up on trust and communication and when communication is now being channelled by zoom, all of a sudden; zoom is zoom phobia.

People can, click on, connect – but

where we lack – and this based on relationships – there’s little engagement.” Q … “And because of COVID-19, I mean there’s a big push these days, to go digital, not just with communications but with marketing, with customers, does that also have dangers? The marketing side”? A “It has profound implications and ramifications. There are consequences and I think this is the point. As you go onto social media, it seems to be that the relationships, and there’s the key word, are more transactional.” It is the above information which shows us that the principles of good business are always best conducted with the personal touch, even in this digital age.

Whilst Mr Urqhart’s focus has been on the selling and consumer engagement interaction, the same principles apply in credit, accounts receivable, and yes, even in debt collection.

The problem with digital engagements is that it is as cold blooded as some of the people who operate their business, only focusing on an upfront – dollar and – cents basis. The value of the human component in business is marginalised or eliminated altogether. As a result, a business created with a focus on digital technology and using “cheaper” resources, loses many valuable sales and efficiency opportunities.

It’s also worth remembering Captain Solley’s statement after landing his commercial aeroplane with hundreds of passengers on the Hudson River. He articulated

“The problem with digital engagements is that it is as cold blooded as some of the people who operate their business, only focusing on an upfront – dollar and – cents basis.”

that technology doesn’t remove problems; it just changes the nature of them.

As an example, many credit and accounts receivable professionals would also add, a dysfunctional customer’s e-billing platform, not supported by properly trained and motivated employees, is a costly nightmare when following up unpaid invoices.

For an example of a strong focus on digital processes verses the employment of people, you need look no further than your bank. Their general approach fails to understand the marketing effect and the negative image received by their customers. Therefore, all banks these days seem to be a clone from the other.

The reality is, as bank customers often cannot see any real difference, they change from one, to another, based on their perceptions of the least-worst experience.

The B2B business relationship

In the case of B2B credit, the supplier which projects the best level of service and interaction with their customers, often has the best sales, cashflow and profit returns. Workplace evidence suggests that if customers find it is easy working with their supplier’s credit/accounts people and processes, they are more inclined to be equally cooperative.

You only have to ask your customer(s) as I have over the years “Why aren’t you buying as much as you use to as in the past?” I suspect you will find as I have done, often it comes down to a lack of customer service and an increase in problems with invoices.

The creditor which does not project a positive image of enforcing their rights, or customer service, has the opposite image problem. The reason for this, is the supplier projects an image where cashflow is not important and organisational incompetence is the norm. In the harsh real world of business, there is no other conclusion.

I’m continually amazed, at the offhand manner which many business owners provide credit to customers they know little about, and/or don’t maintain a close eye on their existing customers. Their mindset must be, “We can’t afford to upset or lose this valued customer, so process the order and everything will work out.” Even businesses with a good track-record of paying can pass-on their misfortune and 60-days overdue invoices can quickly turn into 90 or 120 days overdue. This effect amounts to a huge cash flow issue for the supplier and more unprofitable work for their employees.

Companies which are slow in delivery are perceived as inefficient, and as such, respect for them is diminished. Companies, which don’t manage their accounts well, suffer the same fate; and are perceived to be weak. As a consequence, they are taken advantage of and/or relegated to the bottom of payment priorities list.

Referring to the suppler, there are businesses which promote the concept of “champion sales people” who receive the accolades and rewards. Meanwhile, the rest of the employees who complete and secure the transaction, are often overlooked, or are deemed of a lesser value to the business. Rather than enhancing a team environment, a “them and us” culture and division develops in the organisation. Then, it’s all too easy for unscrupulous and fraudulent customers to play one-side-againstthe-other, and strong business disciplines erode.

It is a fact, that humans “… respect discipline and take advantage of kindness.” We see this fact in everyday life. However, it is often ignored in the business setting. The following example provides an indication of how this truth is often ignored.

A customer goes whinging to the supplier’s salespeople that they are on stop-supply, then the salespeople complain to management. Their beef is that credit/accounts are stopping them selling to a “good customer”. The management team who’s focused on sales and not on cashflow and profits, will often agree with their sales team and force credit/accounts to release the order for the “good of the business.” (Hoping it’ll all work out).

Too late, management finds that the “good” customer is 90-120 days overdue, or leave their business with a bad debt. The animosity between sales, management and credit increases – further destroying any hope of a positive team environment.

“I’m continually amazed, at the offhand manner which many business owners provide credit to customers they know little about, and/or don’t maintain a close eye on their existing customers.”

Marketing your business in a recession

The views of many credit management, risk, debt collectors and insolvency professionals, amongst others, is that we are in a recession and the situation is going to get worse. There are contrary views to this point of view, which are usually put forward by commentators with a vested interest in downplaying the negative consequences when a recession is declared.

When we review what is happening in the business community, again we receive mixed feedback. ➤

“The views of many credit management, risk, debt collectors and insolvency professionals, amongst others, is that we are in a recession and the situation is going to get worse.”

“Image and perceptions mean everything in business. We now live in an age where everything is visible and there is nowhere to hide our secrets.”

A number of businesses are doing really well, whilst others are in despair. It is this mixture of experiences, which sums up the fact that business continues in a recession with both positive and negative outcomes.

For the businesses struggling to survive and come out in a positive position at the end of the recession to enjoy the good times again, there are a number of problems. First there is a matter of maintaining the basic needs of the business available to survive, e.g. sales, positive cashflow, profits and reputational integrity.

The next major problem is to manage the status of the business’s suppliers and customers. If either are affected negatively as the recession proceeds, then this limits the chances of your business surviving.

Next major problem, is how the marketplace, your customers and suppliers perceive your business. This is where understanding the concepts of marketing your business as a solid and responsible entity, comes in to play.

As mentioned earlier, your public image is established on a whole of business experience. This image is noted, especially by your customers, by how well various groups of employees all work together. Previously I illustrated one example of the complaining customer using sales to obtain product and services against the advice of credit or accounts receivable employees.

Another example is where sales do not pass on information to the credit or accounts team because it may affect sales performance, or causes them extra work. The customer is then aggrieved because their message or enquiry was not passed on and resolved, whilst the credit or accounts employees are upset because their work value is compromised.

When customers receive mixed messages, this potentially motivates them to take actions detrimental to your business’s success. This then is not just poor customer service. It also becomes a marketing problem by negating the marketing department’s work of promoting the positive values of your business.

Promoting a point of difference on the whole of business experience when the two examples mentioned in this article are present, promotes a negative image of the business compared to your competitors. There are many actions your business can take to create a whole of business positive image for marketing purposes. What will be surprising to a number of management teams and business owners, is that these positive actions are no more costly than the losses they currently suffer.

In conclusion

Image and perceptions mean everything in business. We now live in an age where everything is visible and there is nowhere to hide our secrets. Despite all the current evidence supporting these facts, I rarely see signs that management is understanding this point.

When it comes to marketing and sales, Australian management also appears to rarely, if ever, learn the lesson, “a sale is not a sale until the money is in their business’s bank account and for six months and one day after receipt.” I fear this lesson, unfortunately is about to be learnt in the coming months and years

One version of marketing reads something like: Marketing refers to activities a company undertakes to promote the selling of a product or service. Marketing includes advertising, selling, and offering products or services to consumers, (retail) or other businesses, (business-to-business).

When it comes to marketing a business in today’s environment, management must realise and value that image and perceptions cover the “whole of business experience.” Having just great products or services, simply is not enough. Your business also needs to know that every interaction “sells’ an image of the business and their representative(s), irrespective of whether that image/perception be good or bad.

Space in this article, does not permit me the opportunity to explain further how to create a positive whole of marketing experience. However, I am always available for a discussion on the subject.

*Kim Radok MICM CCE Founder and owner Credit Matters E: kim@creditmatters.com.au T: 03 9886 6707 M: 0411 649 261 www.creditmatters.com.au