Credit is a Privilege not a RIGHT

In the past three decades risk management has become an integral part of working capital strategies in organizations locally and globally. It is no longer viewed as back-office functionality. Finally, our opinions and presence are making it to the boardrooms, where the executives are more engaged in the discussions on strong recovery strategies to improving Free Cash Flow (FCF).  

Our voices are finally being heard, being asked to install meaningful KPI’s and matrixes that provide executives valuable insights in making informed decisions on how we execute our invoicing strategies, designing strong credit risk models, strategic collection approaches and collaborative cash management that brings our once “don’t talk to them” mentality, to the forefront of the corporate leaders.   

Once called “Sales Prevention” and I remember working in a dark corner of an office, dialing for dollars, the loud clicking of the hard keyboard on the AS400 mainframe, the vary thought of speaking to the executive leadership was unheard of. If you did get called to talk, it was probably to fire you.

In my 32 years in the order to cash (OTC) space I have experienced many industries with high volume of accounts receivable requiring strong and dedicated cash collection, some that were highly successful and those extremely outdated. Either way, those that didn’t have a strong working capital plan … bottom-line … they fail!

The most successful businesses today have a very strong working capital discipline in the Free Cash Flow mindset. Pushing this outlook from the top down with conviction and thoughtfulness is the key. Your sales organization and operational leaders need to be educated to the full extent of the working capital cycle for them to install this mentality down to their teams. It can’t stay in the boardroom.

It is not about DSO (Days Sales Outstanding) anymore of which has many variations in the calculation which doesn’t depict the appropriate turnover rate in AR recovery, whereas a strong collection effectiveness (CE) strategy, a comprehensive vision of what strong FCF looks like coupled with solid SOP’s (Standard Operating Procedures) will separate you from your peers.

Organizations must get back to holding those accountable, rewarding successes and pushing towards a common goal. As Leaders you MUST in fact  have a responsibility to work in the trenches with their teams, “Lead by Example” by showing full support of them, understand their business, then your team will “jump in traffic” for you and take your organization higher than ever expected. I have a proven philosophy.

T.E.A.M (Together Everyone Accomplishes More)

The world today is highly dependent on technology to stay ahead of its competitors; companies are spending heavily in this area, especially on integrated A.I. solutions. Executives want to make it easier to do business with them. Make it more convenient and simpler to order products and services with the touch of a button. This is gaining strength rapidly and is already infiltrating our day-to-day lives and we don’t even know it. All we know is how convenient things are becoming. Over the next decade, all risk management decisions will be automated. The complete Order to Cash (OTC) cycle will be integrated into A.I.

In my 32 years in this arena, one thing I have learned, “you catch more bees with honey than you do with vinegar”. A.I. won’t learn that.

I have worked in the collection recovery business my whole career; collection agency, trucking industry, oil and gas services and construction service; one common denominator in all my experiences; the working capital pressures are the same. They all want a strong balance sheet, high collection recovery rate, strong working capital and a low DSO.

“Create a Sense of Urgency” in all that you do and your working capital KPI’s will be strong.