[Cash Flow] Stay in the Black

Strong sales and cash flow are the lifeblood of profitable companies. Why should your company have to borrow money and pay interest to a bank when your hard-earned money is still in your customers’ accounts earning interest? Why do many sales people in our industry wait for the phone to ring to generate new business? Here are some proven tips to help you improve your cash flow when the slow season rolls around.

CUSTOMER COLLECTIONS. Set accounts receivable goals for your staff at a level that keeps cash flow strong. For instance, a goal of 2.2 percent of monies more than 60 days overdue may be reasonable. All employees who have contact with the customer should be involved with the collection process. Accounts receivable goals should be a part of their job descriptions and their evaluation standards for performance reviews, as well as a part of their bonus programs. Pay sales representatives and technicians based on their cash receipts only, or charge back reps who receive their commissions in advance for poor-paying customers. The trick is to get all employees working together to make sure jobs are paid for in a reasonable amount of time.

STEP UP YOUR SALES. If your technicians and sales people are waiting for the business to come to them, then expect to have poor sales growth and cash flow throughout the traditionally slow months. There is no question that successful sales people and companies have a way of adapting to business trends.

Here’s what they do in the off-season. Set lead generation quotas for all employees who are involved in the sales process, including technicians, sales reps, customer service reps and supervisors. For instance, all pure sales reps must self-generate enough leads to run five or six sales calls per day. Technicians need to turn in a minimum of one lead per day.

Invest in a professional telemarketing service to help your company generate leads in the slow season, or hire an in-house resource to do this part-time. Pay the in-house resource for results with greater incentives for leads that result in a sale. Run sales contests and lead contests for all employees. A bigger prize can be given to the top performer in each division each month.

Use your existing customer data base as your primary source of new business during the slow season. Run a report that shows all of your customers who have a termite contract, but no other service contracts that your company offers. Then run a report that shows all of your customers who have a service contract with your company, but no termite contract. Train your sales department how to research these potential leads, so your office employees can focus on collections and telemarketing efforts.

PAYMENT PROGRAMS. Get daring when it comes to your customers’ payment programs. I’m not talking about extending payment terms, I’m talking about shortening them. If your company tries to cater to all potential customers and your accounts receivable is in bad shape, then you need to analyze the types of accounts that hold back on payments (or beat you for the money all together). Create a “good” and “bad” customer profile, identify good customers and design your programs around them. Walk away from potentially bad business.

When you have the money in the bank, scheduling production becomes a passive process not a labor-intensive one (i.e., when the customer still has the cash).

The author is a board certified entomologist and is president of Residex.

Show Me The Money

Here are some tips for shortening payment terms:

• Offer all customers a discount for year-in-advance payments (10 percent to 15 percent is sufficient).
• Do not extend any payment terms to residential customers (including residential termite jobs); only accept cash, credit card or checks. Invoice residential customers one year in advance of service during renewal periods.
• If you offer pay-as-you-go plans, expect your production to drop off during slow season months. Receiving payments in advance of service puts you, not your customers, in charge of your business.