Tag Archives: Measure

Strategy

Get Clear

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How does an entrepreneur GET CLEAR?  Really clear about business, customers, profits and the entire spectrum that makes up an entrepreneur’s life.

How CLEAR are you about your business goals, most profitable market segments, long-term strategy, day-to-day business operations and the integration of all these with your life goals?

You may have an immediate sense of what you think you want. It could be one or more of the following:

  • Better Margins, More Profits, More Revenues
  • More Customers, High Ticket Customers, Customer Retention
  • New Market Segments, Products, Services
  • Get out of day-to-day Firefighting (Crisis Management)
  • Create more time for creating new avenues for your business instead of being stuck in day-to-day crisis handling
  • Find better employees (who own their work and are proactive)
  • Build Better Systems
  • Streamline your operations in such a way that your employees take ‘complete responsibility’ for their roles & solve problems proactively instead of making excuses

Whatever is on your list, it is often difficult to decide where to start.

Seth Godin has a riff titled “The Priority List”. He says, the ability to decide “what to do next” is an underrated skill. For example, he says:

Is it better to email an existing customer, send a brochure to a prospect or improve your product a bit? Should you tweet or post a new blog post? Should you have a meeting to coordinate your team or spend ten minutes returning phone calls instead?

His tip:

Do you have a list? Have you figured out which metric you’re trying to improve? Can you measure the impact of the choices you make all day?

I see this mistake in business development all the time. Assume for a moment that the goal of someone in this department is to maximize profit. Why then would this group spend most of its time tweaking existing deals (looking for a 3% improvement in yield) instead of spending the same time and effort doing new, game-changing deals?

If you already have your LIST along with corresponding MEASURES, and you are still struggling to “Get Clear”, then what could be missing is clarity regarding your goals.

When did you last review your Goals? What are you REALLY up to?

Stephen R. Covey said “Priority is a function of context.”

So, WHY are you doing whatever you are doing?

Is that CLEAR?

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Cash Flow, Featured

BizVidya Guide: Reduce your Days Sales Outstandings

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accounts-receivables2

Days Sales Outstanding (DSO) is your company’s average collection period.

The smaller this number, the faster you are in collecting money from clients.

[For the mathematically inclined, a more accurate measure of your Collection Department’s performance is the Percentage of Overdue Amount (monies beyond due date) to Total Due Amount (Total uncollected amount including fresh sales) – also, known as Days Delinquent Sales Outstanding (DDSO). See Advantage of using DDSO to measure the effectiveness of the credit department (http://www.encyclopediaofcredit.com/WebHelp/articles/risk_analysis/art730.htm )].

Depending on the nature of your business (for example, number of transactions, customer profiles, and competition), you may choose from a variety of strategies and tactics to reduce your Accounts Receivables Average.

Tip #1: Re-evaluate your Credit Sales Policy

 

Why are you selling on Credit? Why not Sell ‘Cash’?

Sell ‘Cash’! On Zero Days Credit! Even better, see how you can collect advance before delivering a product or a service.

Yes, you heard it right!

Question your product/service/marketing strategy – why are you selling on credit, at all?

Take a fresh look at your product/service basket and market segments.

Perhaps, you can identify products/geographical regions where customer will willingly/happily pay cash. This could be because your product or service is tightly coupled with (and/or is essential to) the customer’s workflow and you can create an edge over competitors due to stock availability, location, price, etc.

Create a marketing/selling strategy on how you can channel adequate energies and resources on finding and selling in those areas (Location/Features/Price) where customers will easily pay cash.

Tip #2: Create/Modify/Implement a New Credit Policy which helps you plug cash flow leaks

If you do not have a Credit Policy, create it to achieve clarity and consistency in giving credit to your customers.

If you already have a Credit Policy, revamp it to take advantage of changing market conditions.

Once you have an up-to-date Credit Policy, implement it with rigor and discipline. Make someone accountable to track Credit Policy deviations.

Tip #3: Have a New Customer Policy, Customer Retention Policy & Customer Firing Policy

Don’t do business with any and everyone. Do background checks before committing transaction with a new customer. Identify and give higher priority to faster paying customers. Fire your low-value slow paying customers.

Tip #3: Streamline Your Collections Process

 

  • Insist on having your collection follow-up process move with clock work precision.
  • Based on Due Date of Outstanding, schedule the escalation process – Emails, SMS, Calls, Visits and Legal Recourse.
  • Ensure that the monitoring team regular sends New Customer Verification Reports, Credit Policy Deviation Alerts, and alerts on payment variations and disputes.

Tip #4: Update Your Customer Contact Details

 

Over a period of time, customers change their contact persons, phone numbers (including landline), email-ids and even physical locations. Having an updated customer contact database facilitates the collections process and this could be critical in following up on delayed payments and/or taking legal recourse.

Tip #5: Train Your Team to Follow up with rigor and discipline

 

A well trained tele-calling follow-up team knows when to use appropriate tricks of the trade – like calling on odd-hours, when to insist on cheque number, follow-up based on customer’s cash flow cycle, and so on.

Watch this space for more on each (and many more) of the above.