It’s true that most people who owe you money typically don’t like you. They feel guilty if they’re late with a payment and burdened that they’ve procrastinated. While they know it’s not your fault, they still feel pressured and unhappy.
Today’s clients are more stressed than ever about finances. If you want to avoid this stress, take the following steps to clearly outline your company’s financial policies. Clear financial policies are an integral part of customer service, especially when presented by a warm, empathetic and knowledgeable staff. In addition, for a policy to be effective, it must be well understood by the staff and backed up by the dealership owner and manager.
Rules for Accounts Receivables
As a basic guideline, your accounts receivable (AR) balance should not exceed one-half to one month of sales.
- Run a clean AR report that does not include credit balances, and proceed to analyze the 60-day-and-over column, as well as the 90-day-and-over column. In general, the 60-and-over column should not be more than 4-6% of what your clients owe you. The 90-and-over column should not be more than 2-4% of your AR.
- Run a past due report and make follow-up calls for any accounts that are 30 days past due.
- The owner’s role is to hire, train and provide oversight for your financial health. Even with the best manager, the dealership owner should still be involved. The owner should review the AR on a monthly basis, or more often if it needs additional attention.
- If your AR balance is less than one-half of your typical monthly sales, your financial policies may be too firm and sales staff may be unintentionally running clients off. On the other hand, for your established contractor or consumer customers, you might consider flexibility in payment if they have demonstrated a good history. If you do offer financial options, do not extend them for more than three months. Verify the credit history of the client prior to advancing credit.
Time to Collect
Sit down with your sales and service department staff to write out dealership financial guidelines. The collection of money owed is the responsibility of the entire staff. Once the guidelines are created, everyone needs to approve and own up to them so there is no room for customer dispute. If financial policy is changed, it is advisable to draft a “change of policy letter” for staff and customers.
These are just some of the guidelines you will need to define with your staff. There is much more to consider: verbal skills, past due accounts receivables, how to connect with the client, and how to express warmth, empathy and concern. Firm, consistent financial policies are a great start to offering the financial service that your customers deserve and expect.
Dr. Rhonda Savage is speaker and CEO for a well-known practice management and consulting business. Dr. Savage is a noted speaker on practice management, communication and leadership. For more information on her speaking, e-mail firstname.lastname@example.org.