Leaves turn, snow falls, and seasons change. But did you know that your customer collections strategies may also need to change accordingly? Businesses, too, experience slow and busy "seasons" or cycles throughout the year that can have a major impact on how willing and able they are to pay your invoices. In this article, we'll share some tips for navigating business cycles to minimize impact on accounts receivable collections and and cash flow.
Holidays and Vacations for Accounting Staff
It probably goes without saying but we’ll say it anyway … the biggest seasonal factor for collections is vacations and holidays.
During the summer months, more than half of Americans take days off. During this time, collections may slow down while your customers’ accounting staff is on vacation. This phenomenon works in the other direction as well – customer payments can be delayed or slow down when your own collectors are out of the office.
One simple way to avoid this seasonal slowdown in collections is to make sure you have multiple A/P contacts with your customers. That way if your primary contact is out on vacation, you have a backup to get in touch with and continue the communication and invoice payment process without interruption. In some cases, it turns out there is only one single contact – but it never hurts to ask your primary contact who you should follow up with when they are out of the office.
During the summer months, more than half of Americans take days off. During this time, collections may slow down while your customers’ accounting staff is on vacation. This phenomenon works in the other direction as well – customer payments can be delayed or slow down when your own collectors are out of the office.
One simple way to avoid this seasonal slowdown in collections is to make sure you have multiple A/P contacts with your customers. That way if your primary contact is out on vacation, you have a backup to get in touch with and continue the communication and invoice payment process without interruption. In some cases, it turns out there is only one single contact – but it never hurts to ask your primary contact who you should follow up with when they are out of the office.
Planning and Communicating During Holidays
We’ve all had the experience that those couple of days before and immediately following a holiday is a tough time to get a hold of anyone in the office. Even when the office is still technically open, most people are already looking ahead to or recovering from the extended absence.
So it's no surprise that customers will be less willing to answer the phone, reply to email, or simply work with you on the days immediately prior to and following a holiday. The tendency is to want to leave the office with an empty task list and then have some time upon returning to complete new tasks that accumulated while away. Therefore, getting in touch well before the holiday or waiting at least 2-3 days following will give them time to catch up, clear their mind, and offer you their full attention.
See Also: AR Collections Lessons From a 5-Year Old
When your collectors go on vacation or are away for the holidays, make sure you have a documented plan for handling collections in their absence. At companies with multiple collectors, consider temporarily assigning accounts to another staff member. With only one collector, designate his or her temporary replacement and make sure they have the training and resources available to get the job done effectively as well as make the transition hassle-free for your customers.
So it's no surprise that customers will be less willing to answer the phone, reply to email, or simply work with you on the days immediately prior to and following a holiday. The tendency is to want to leave the office with an empty task list and then have some time upon returning to complete new tasks that accumulated while away. Therefore, getting in touch well before the holiday or waiting at least 2-3 days following will give them time to catch up, clear their mind, and offer you their full attention.
See Also: AR Collections Lessons From a 5-Year Old
When your collectors go on vacation or are away for the holidays, make sure you have a documented plan for handling collections in their absence. At companies with multiple collectors, consider temporarily assigning accounts to another staff member. With only one collector, designate his or her temporary replacement and make sure they have the training and resources available to get the job done effectively as well as make the transition hassle-free for your customers.
Business Cycles and Cash Flow
Another factor that can affect collections is your customer’s cash flow when their business is seasonal or cyclical. Keep in mind that just because your products are not seasonal, it doesn’t mean your customers are not seasonal. For example, a company that sells plumbing supplies may not experience significant seasonal fluctuations. However that same company may have customers in the swimming pool business that experience significant seasonal cash flow changes and fluctuations.
Typically the worst period of cash flow for a seasonal business is 1-2 months before their high season. That’s because they’ve experienced a low level of sales for the previous months and are likely building up inventory (and using up cash) for the coming high season.
See Also: 3 Ways Credit Managers Can Beat Bad Debt
Typically the worst period of cash flow for a seasonal business is 1-2 months before their high season. That’s because they’ve experienced a low level of sales for the previous months and are likely building up inventory (and using up cash) for the coming high season.
See Also: 3 Ways Credit Managers Can Beat Bad Debt
Less Obvious Seasonal Factors
There are other seasonal factors that can also slow down a customer’s ability to pay but may not be as obvious as Christmas or summer.
Do you have customers that attend multiple trade shows? Are those trade shows scheduled around the same time every year? If so, this may slow down payment because the A/P person or check signer is out of town or working on trade show projects. That’s why it’s important to keep up with your customer’s news and activities. A good way to do that is subscribe to their newsletter, follow their accounts on social media, and keep a pulse on what’s happening in their business.
Do you have customers that attend multiple trade shows? Are those trade shows scheduled around the same time every year? If so, this may slow down payment because the A/P person or check signer is out of town or working on trade show projects. That’s why it’s important to keep up with your customer’s news and activities. A good way to do that is subscribe to their newsletter, follow their accounts on social media, and keep a pulse on what’s happening in their business.
Tracking Payment Trends
Perhaps the best indicator of potential seasonal collections issues is your past experience of customer payment trends. While you may not know for certain whether a customer’s business is seasonal, a review of average days to pay over years of history may reveal a pattern of slow payments during certain parts of the year. With this knowledge, a collector may increase his or her efforts leading into a historically slow collection period. This can help move your invoices toward the top of the list to pay at a time that’s earlier in the cycle and perhaps before things really slow down.
How to Collect On-Time, Every Time
Having a solid collections strategy is a great start. Having the right tools to implement that strategy is even better. With Collect-IT Software, you get both!
Collect-IT is accounts receivable and credit collections management software for Sage 100 that tracks, manages, and reports on all the A/R information that could otherwise fall through the cracks.
Collect-IT is great for seasonal collections because it includes critical tools and features like multiple collections contacts, unlimited customer collections strategies, automated payment reminders, detailed notes and custom fields, and a complete audit trail of all communication and steps taken to collection on accounts receivable invoices.
Collect-IT is accounts receivable and credit collections management software for Sage 100 that tracks, manages, and reports on all the A/R information that could otherwise fall through the cracks.
Collect-IT is great for seasonal collections because it includes critical tools and features like multiple collections contacts, unlimited customer collections strategies, automated payment reminders, detailed notes and custom fields, and a complete audit trail of all communication and steps taken to collection on accounts receivable invoices.
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Guest Post by Dynavistics, Inc.
This article was provided by Dynavistics, Inc. The company's innovative add-on software solutions - like Collect-IT - will transform your “I wish I could” into “I know we can” by enhancing your existing ERP software so it's capable of doing more than you ever thought possible. Their solutions for wholesale distribution, A/R collections, delivery management, and more integrate with popular ERP applications including Sage and Microsoft Dynamics. |
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