Every once in a while many company finance teams evaluate the profitability of your customer base. One of the important criteria is a measure called days sales outstanding or DSO. The calculation measures how long it takes an invoice to be collected once the product is shipped or service is preformed. There are certain customers who gain some measure of infamy with the finance department credit analysts and A/R collectors. If the situation continues long enough, the finance department will ear mark this customer to be dropped. Because this can affect company market share, the marketing department and the sales team generally have adverse reactions to this measure. So how does a good owner or president/CEO resolve the issue?
A good way to assist the finance group is to get the support of the sales team. Give them laptops so that when they are on sales calls they may access the invoices for the customer. If there are any invoices over a certain delta, the sales team should be involved in helping to collect the delinquent invoices. If you business can not afford to buy laptops for the sales team you could consider renting them from a source like www.rentacomputer.com who can assist your business in their temporary needs.
If the sales team works in conjunction with the finance department, then there wont be any surprises when its time to review the customer list. Both departments will have a part of keeping the customer with in financial limits. On the other hand, by keeping the customer within proscribed limits, the sales department keeps its hard earned customer and market share. In this case both departments and the company as a whole wins, and if in the unfortunate event a customer does need to find a new source, then there is buyoff from everyone that this unfortunate measure must be taken.
Have sales and finance view each other as a team and your company’s DSO will drop, and that is a very, very good thing!
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