Getting Paid Is What It’s All About

edit-paid-0111The single biggest challenge that custom channel dealers seem to face is the management of their cash flow. Just recently, another dealer in Edmonton closed their doors. At first I hadn’t given the rumors of their impending demise much thought since, to be honest, I’ve been hearing those rumors about them for the past seven years. It finally happened though, a classic integrator meltdown, complete with vendors left holding the bag and clients left in the lurch, minus their deposits.

Just weeks before I had gone on record as saying that the dealers in Edmonton and Calgary that were going to fail had failed, and that I was confident that the survivors of the recession would be in for the long haul. That just shows how little I really know.

The reality is that none of the integrators I’ve known who’ve closed their doors failed because they didn’t know enough about loudspeakers. Product has nothing to do with it. Inevitably it’s because they weren’t very good at either collecting what was owed to them or controlling their costs, and often both.

Integrators keep hearing that they need to run a tight ship, manage costs, control processes, and collect receivables in a timely manner. It’s a drum that gets beaten by vendors, the CE trade media, and from fellow dealers in venues like CEDIA’s Survival of the Fittest webinar series.

Managing costs is a subject that’s so extensive it needs its own column, even though it’s not rocket science. More importantly, expense cutting is only one part of the equation. The fact is, you don’t make money by cutting costs; you make more money by making more money.

It may sound hard to believe but collecting of outstanding receivables is a huge weak point amongst integration companies. I’ve seen it time and again.

One of the most common reasons is that in small companies the staff often has to juggle a variety of duties beyond their basic job description. Often, the sales staff and the office manager assume that the other is collecting payments from clients.

See related  Women's Luncheon at CEDIA Is Giant Hit!

At my old job, I was asked to take ownership of one of our major builder clients and looking back, I noticed that we hadn’t billed them for nearly two years. It was a not inconsiderable sum: around two hundred grand.  You can tell it was a boom economy that we could leave that much money on the table and not be hurting, but I still don’t recommend it.

Because no one person previously had them as “their account” no one had ever sent them an invoice.  I asked the builder about this and he replied that he always thought that was odd, but wasn’t about to say anything. After all, why pay a bill if you haven’t been asked to? He promptly and cheerfully paid once I actually invoiced him.

If we’re all agreed that getting paid is good, what does it take?

Assign invoicing and collecting to one person. If only one person invoices clients and reconciles payment, then there’s no assumption that someone else will take care of it.  Even better the general can keep a better handle on it by only having to ask one person what’s been paid and what’s still outstanding.

Whatever accounting and business management software you use, you need to know how to understand your receivables at a glance, and identify overdue balances. If you don’t know, learn.

Finally, follow up. If a client has an outstanding balance, bring it to their attention.  Just as some people are afraid to close the deal, some people get nervous asking for money. Personally neither bothers me. If you don’t ask, you won’t get.

Lee Distad is a rAVe columnist and freelance writer covering topics from CE to global business and finance in both print and online. Reach him at lee@ravepubs.com