Are You a Cash Flow Expert?
In most businesses--but especially small ones--three or four departments are responsible for creating a sustained cash flow. "Sales, Operations, Shipping and Accounting all play a part," says John Conroy, a cash flow expert from West Haven, Connecticut. "Typically, each department reports to separate managers. No one person sees all the activities that produce a check from a customer and can follow up to see that all are being done correctly and in a timely manner." Many companies hire cash flow experts to keep an eye on the larger company cash flow picture. However, in many companies, the credit manager is expected to be the cash flow expert. If this is the case in your company, you need to have the power, knowledge, and skills of a good cash flow expert. Get the Power
To succeed in cash flow management, you need your company to give you the following power:
- You must be able to get information from every department in your company to settle billing questions, whether they be about billing, shipping, manufacturing, or any other system in the company.
- You must be able to negotiate with customers for payments and to ask other departments to back you up.
This is the kind of power an outside cash flow expert would have. He or she is able to talk to customers about billing problems and can then turn to the appropriate department to decide if the customer has a valid complaint. Of course, other departments understand that this expert has the right to come in and ask these questions. They know this person has been hired specifically to deal with these problems. As credit manager, you may have to work a little harder to get this kind of support. At first, it may seem to other departments that Credit is sticking its nose in where it doesn't belong. This is why you need to have upper management's commitment to back you up. Make it clear that cash flow is a team effort and not just the responsibility of Credit alone. Get the Knowledge
Power is just the first step toward becoming a successful cash flow expert. Next, you must make certain you have the information you need to get the job done.
- Understand your company. "The expert must be able to work with all departments and examine all written material related to a billing problem," Conroy emphasizes. A cash flow expert should know how goods are produced, packaged, and delivered. He or she should also understand how they are sold and serviced.
This way, when customers complain that they have not received a bill, or product was shipped incorrectly, or it was not what they ordered, the expert can go to the proper department to get answers. Having a broad view of the company means the expert will understand whether a process has been completed successfully or if it was done incorrectly and the customer is entitled to some adjustment in the bill. - Understand your customers' companies. A cash flow expert is able to look at a customer and find problems that lead to nonpayment of accounts. For example, many customers complain that they never received bills. In some cases, this is just a ploy to extend payment time. In others, there are legitimate problems with the mail. It is up to the cash flow expert to determine where the problem lies.
"One company I worked with claimed it was not receiving invoices," Conroy recalls. "We discovered that the bills were lost when mail was distributed among the company's different buildings." Get the Skills
There are several skills and traits a cash flow expert brings in that allow the person to succeed. As a credit manager, you must have these same skills and traits if you want to keep cash flowing smoothly. Aggressiveness. "A cash flow expert needs to keep at an account," Conroy says. The expert is determined to track down all the necessary information and get the customer to pay and aggressively follows up on every account.Sales and customer service skills. A cash flow expert should have some knowledge of sales and customer service techniques. After all, collecting is really "selling" a customer on the idea of paying, and getting the customer the information it needs to pay is a kind of customer service.Negotiation skills. A cash flow specialist must be able to negotiate with anyone associated with an account. "A company wasn't paid for installing two conveyors in a hospital," Conroy says. "They felt that the manufacturer of the conveyor was responsible for building a safety enclosure around one of the conveyors. Through negotiation, we convinced the general contractor that building the enclosure was the contractor's responsibility. Then they were paid."Organization. A cash flow expert must take an organized approach toward keeping cash flowing smoothly. One key to organization is regular follow-up on all accounts. "Only through weekly follow-up is the cash flow specialist likely to find out that mistakes were made, make sure a correct bill is submitted, and then stay in touch with the company to make certain it is paid," Conroy says."Power, knowledge, and skills -- these are what the cash flow expert needs to do the job right," Conroy says. If you are the cash flow expert in your company, make certain you are given the power, get the knowledge, and develop the skills you need to succeed. Editor's Note: The above article originally appeared in the Credit & Collection Manager's Letter, a newsletter purchased by CollectionForum.com in 2006. This article originally appeared prior to 2000.
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