Keys to Improving Your Collections Process
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Transcript of Keys to Improving Your Collections Process
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Key Stepsto ImprovingCash Collections
Hennessey
CAPITALGrowth Capital. Financial Wisdom.®
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Financial Spectrum
Seed CapitalAngel Investment
early stage equity investment
Venture Capital
early/mid stage equity investment
Asset-Based Finance
early/mid stage debt facilities
SBA Lending
mid stage debt facilities
Equipment Finance
asset specific mid/later stage
financing
Conventional Bank Lending
later stage debt facilities
Start-Up Rapid Growth Maturity
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Factoring
• Simple way to access cash tied up in A/R• Leverage up to 90% of invoice value• Use for specific invoices or specific customer• Can be used in conjunction with current bank
facility• Cost is based on percentage of sales• Combine with business resource services
- Credit, Collection and Treasury Management• Provides additional level of invoice management
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Steps to Improve Cash Collections
The The Sale Sale
Before
During
After
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Key Steps - Prior to the Sale
• Understand competition and value of your product
• Know your customer AND your customer’s customer
• Develop risk tolerance level
• Be prepared to say “NO!”
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Collections in Action
Who is the end customer? • Selling to a municipality – understand the
processes and potential “red tape”• Auto supplier – understand the supply chain and
how industry trends or news may impact your payment cycle
Consider your risk level • $100k sale 20% profit margin- $20K contribution• $80k loss results in $400k of new sales at 20%
margin
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• Ask around town
• Don’t be afraid to negotiate and be creative
• Set the rules of engagement– Structure – Pricing
• Be upfront and honest
Key Steps - During the Sale
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Talk to your Customer
Don’t be afraid to ask • Down payment: historically received 20% down,
needed 40% due to bank restrictions• Company was rewarded, due to exceptional
customer service and valued relationship
Terms• “Cash in” needs to match “cash out”• Payment terms can be based on
progress/milestones accomplished on a project instead of payment upon completion
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Key Steps - After the Sale
• Develop and follow your process
• Consistent internal and external communication
• Build a relationship with your customer
• Recognize and understand the red flags
• Know your leverage points
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Collections in Action
Relationships• A/P may be willing to give you “behind the scenes”
insight, if a solid relationship has been built
Delayed payments - be cautious • Requests to pick up a check in person • Arriving unannounced • Ask for credit card payment
Leverage• Tooling supplier - hold up shipments, lien filings• Staffing - stop sending people
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Credit Resources
• Dun & Bradstreet – provides commercial information on businesses.
• Moody’s – provides credit ratings, risk analysis and research
• Hoover’s Inc.– provides information primarily on publicly held companies
• Bernard Sands – provides information on companies in the retail industry
• Ansonia Credit Data – Co-op for credit information, members provide their credit history to be shared
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Credit Resources
• TransCredit – provides information on the transportation industry
• Experian – known for personal credit reports but also provides information for businesses
• Yahoo Finance – business news and credit information, primarily on publicly held companies
• Business Capital Risk Control Services – provides background information on businesses and individuals
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Questions?
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Thank YouMike Semanco
President & COO
Hennessey Capital
248.658.3201
Candace Pavliscak
Senior Vice President
Hennessey Capital
248.658.3204
Learn more and contribute at: HennesseyCap.com/CapitalConversations.