Issue link: http://read.dmtmag.com/i/105367
30 • FEBRUARY 2013 • WORLD FENCE NEWS Sell it, erect it, collect it – then convert receivables into cash quickly BY TOM LUBY, PROFIT BUILDERS INTERNATIONAL The holidays are over and now the bills are due. January and February are notoriously slower times in the fence industry, especially in the northern Snow Belt tier of the country. I don't have to tell you cash flow is so critical, especially in slower volume times of the year. You need to pay your bills and stay afloat, and now you are scrambling to find money to pay those bills. Does this scenario sound familiar? As the manager or owner of a small to midsize fence company, this could be A Leader in Custom Fencing Products with Top Level Service Buy American, Be American™ u u u AAMA 2604 COMPLIANT We are environmentally responsible a tough time. Over the past year your sales team made the sale, your crews installed the fence, but now you can't get paid. Too often your customer won't return calls, breaks promises, issues NSF checks, short pays, etc. Unfortunately, you need your money to pay bills, and like the TV commercial says, "It's your money and you want it now!" You want to tell your deadbeat customers that you are not a bank, so pay up! But how do you do that? A common goal of many fence company owners is to increase sales, grow the business, sell it for tons of cash and retire. Sound familiar? Well, you are not alone. But be very careful; sometimes we are so blinded and anxious to reach our growth objective that we make poor credit decisions. Also I have seen many a fence company sell too low to achieve volume, and that can be a big mistake. Always remember that selling to poor paying customers and selling without sufficient profit margins is simply spinning your wheels and will get you nowhere, except maybe bankrupt. Wouldn't you like to increase your cash flow, decrease your accounts receivable and bad debt, and improve your customer relationships to boot, all at the same time? Let's see if we can discover a few tips together to help do just that! First of all, a word of caution and advice regarding your hard-earned money. You work very hard in your business and if you are selling your product too cheaply all the best collections procedures in the world will not make your discount fence sale profitable. You need to address reliable job costing and develop a model that will ensure you have sufficient mark-up to cover your overhead as well as budgeted profits. You have to start with the ability to make money in the first place, and then install assurances you collect the money you have earned. With overhead covered and a fair profit margin included in the bid, the next tip is that good collectors follow the "early bird gets the worm" theory. The normal rule of thumb is that if your customer has limited funds, the first person to ask for their money will likely get paid first. The longer you wait to initiate collections, the lower your chances for success. continued on page 32