One of the issues we see day to day is the fact that many B2B clients don't have a solid relationship with the Accounts Payable clerks at their client companies. This is a problem!! Your invoice's likelihood and ability to be payed quickly may be in direct correlation to your AR clerks relationship with the AP clerk at the client company.
How do you build proper relationship? It begins when the client is brought on to your rolls. Have the AR clerk call the AP clerk and introduce themselves, maybe even send a small gift (cupcakes, specialty food item, something native to your area) , and begin a dialog. Have your AR clerk ask how the client company prefers invoices, snail-mail or electronic. Ask them what your company could do to make the process easier, is there a better day to send invoices to get paid quicker etc.
You see, COMMUNICATION is everything, and the sooner it begins, the better!!
If you have other concepts along this line send them to me bblackburn@therecoverynetworks.com......
31 March, 2009
06 March, 2009
Business Week Article...19% of employers plan to drop health benefits
By..Joanne Wojcik
Nineteen percent of employers responding to a new Hewitt Associates Inc. survey are planning to stop offering health benefits over the next three to five years, nearly five times as many as the 4% that said they were planning an exit strategy last year.
For those employers planning to continue to provide health benefits, keeping employees healthy has become the primary workforce issue in 2009, up from the No. 2 position in 2008, according to Lincolnshire, Ill.-based Hewitt's survey, "The Road Ahead: Emerging Health Trends 2009."
"Promoting employee accountability" was ranked the chief health and prevention component of employers' health care strategies in 2009, followed by "offering competitive benefits" and "managing health risk." In 2008, employers selected "offering competitive benefits" as their chief objective, followed by "promoting accountability" and "tightly managing health care cost trends."
"In today's environment, employers are under pressure to cut health care expenses, but they realize that short-term cost-management tactics do not address the underlying drivers of health care cost," Jim Winkler, head of Hewitt's North America Health Management Consulting practice, said in a statement. "This leaves them with two options: making a long-term commitment to improving the health of employees and their families, or exiting health care altogether." Among other survey findings:
· More employers are targeting specific health conditions within their employee populations than in previous years. Specifically, employers are targeting asthma, cardiovascular disease, depression and diabetes.
· When employers were asked to what extent health care reform proposals outlined by the Obama administration would affect their current health care strategies, 51% said they would have some impact, while 44% said it would have no impact.
· While one-third of executives think the Obama administration and Congress should address health reform in his first year in office, 63% believe it will take place in President Barack Obama’s first term. Moreover, 60% said the federal government should take the lead vs. 33% who said the federal government and the states should share responsibility.
A total of 343 benefits executives from a broad spectrum of industries responded to the survey, which was conducted between December 2008 and January 2009.
For more information about the survey, contact Maureen Mersch at maureen.mersch@hewitt.com or Mary Ann Armatys at maarmatys@hewitt.com.
Nineteen percent of employers responding to a new Hewitt Associates Inc. survey are planning to stop offering health benefits over the next three to five years, nearly five times as many as the 4% that said they were planning an exit strategy last year.
For those employers planning to continue to provide health benefits, keeping employees healthy has become the primary workforce issue in 2009, up from the No. 2 position in 2008, according to Lincolnshire, Ill.-based Hewitt's survey, "The Road Ahead: Emerging Health Trends 2009."
"Promoting employee accountability" was ranked the chief health and prevention component of employers' health care strategies in 2009, followed by "offering competitive benefits" and "managing health risk." In 2008, employers selected "offering competitive benefits" as their chief objective, followed by "promoting accountability" and "tightly managing health care cost trends."
"In today's environment, employers are under pressure to cut health care expenses, but they realize that short-term cost-management tactics do not address the underlying drivers of health care cost," Jim Winkler, head of Hewitt's North America Health Management Consulting practice, said in a statement. "This leaves them with two options: making a long-term commitment to improving the health of employees and their families, or exiting health care altogether." Among other survey findings:
· More employers are targeting specific health conditions within their employee populations than in previous years. Specifically, employers are targeting asthma, cardiovascular disease, depression and diabetes.
· When employers were asked to what extent health care reform proposals outlined by the Obama administration would affect their current health care strategies, 51% said they would have some impact, while 44% said it would have no impact.
· While one-third of executives think the Obama administration and Congress should address health reform in his first year in office, 63% believe it will take place in President Barack Obama’s first term. Moreover, 60% said the federal government should take the lead vs. 33% who said the federal government and the states should share responsibility.
A total of 343 benefits executives from a broad spectrum of industries responded to the survey, which was conducted between December 2008 and January 2009.
For more information about the survey, contact Maureen Mersch at maureen.mersch@hewitt.com or Mary Ann Armatys at maarmatys@hewitt.com.
16 February, 2009
Incentive
Incentive
Everyone acts according to incentive.
This is why many businesses choose to pay sales staff primarily by commission, so that the sales staff will have an incentive to close sales for their employers, and bring in more profit for the firm.
By building incentive into the system for their sales reps, they align their interests and ensure mutual benefit.
The trouble is, businesses (and their vendors) are actually disincentivized to do what is best for that business in the Accounts Receivable (A/R) Department.
But it isn’t obvious how.
It will take a little bit of work, but this report will walk you through, step-by-step, how your A/R department is losing you money every day, because of how incentive is mis-applied, and what you can do to fix it.
Part One:
The Business
Imagine you are a business owner.
You have a healthy business, with a pretty good Accounts Receivable department chugging away, issuing invoices and collecting payments.
But some of your clients don’t pay right away. In fact they can go pretty long without paying, and eat up a lot of your resources while you try to collect the debt.
You are referred to a third-party collections company that has agreed to collect all your bad debt for you without you paying anything at all unless they do collect. But, if they do collect, you have agreed to split that amount 50-50 with them. (A “contingency-fee”)
Sounds good so far, but consider this:
Studies have shown that, on average, accounts typically lose around 10% in value for every month that goes by without it being collected.
So, in round numbers, your $1,000 account is worth maybe $900 after 30 days, $810 at 60 days, etc…
At 12 months late, your accounts are only about 22% recoverable.
At some point though, you have to hand the account over to your collections company so they can initiate their collections efforts, before the value goes to zero, right?
But when?
You’re not going to do it at 30 days late, when it is still highly likely that your client will pay you, right?
That would be like giving away $450! (Since they would keep half of what they collect and its worth about $900 at this point)
What about at 60 days late? - It’s worth $810, so it will cost you $405 - no way!
Why would you? They are bringing very little value at this point but they still get a huge paycheck for doing what you probably could have done without them.
90 days late?.. 120 days?.. 360?..
You can’t submit it to them when it is fresh and still highly recoverable because that would be far too expensive, and essentially giving away your profit margin (or more).
Instead, you are forced to hold on to these accounts because you can’t afford to pay this company to collect on accounts that are only a little bit late.
You have to wait until you are sure that you aren’t going to be able to collect it yourself, before you turn it over to this company, or else you will end up handing over so much “good” money to chase the “bad” it isn’t even worth it.
Part Two:
The contingency collections firm
Now imagine that you are instead an owner of a contingency fee based collections firm. In fact, you own the very firm in our previous example.
You keep 50% on anything you are able to collect.
You have developed a pretty sizable client base and get a steady steam of past-due accounts.
Let’s say that one month you get a $100,000 account from a large IT firm. You also get ten $10,000 accounts, and a hundred $1,000 accounts.
Which accounts do you think you would focus on? Definitely the $100k account first, right?
Then the ten worth $10k? Of course.
Two-thirds of your potential profit is in this top eleven percent of these accounts.
Because you are paid based on what you collect, and because these accounts have much more money in them, you are incentivized to focus on these larger accounts.
Also, because you don’t have any accountability to your clients for how you choose to pursue the past-due amounts, you can basically file the smaller ones away to follow up on once you are done going after the big balances, if ever.
This is called Account Skimming, and it is very common in contingency fee firms.
But, what about those businesses that submitted those smaller balances?
What if all those $1,000 accounts that are 6 months late are yours, and you really need to get as much as you can out of them?
But it’s not going to happen because all of their time is spent on the bigger balances.
Because they, like you, want to make as much profit as they can, and that’s where the most potential is, in those mega-balances.
In addition, they are incentivized to use any harsh means to collect they see fit, since they don’t care about your relationship with this debtor, they just want to get a check out of them.
They also offer no peformance guarantees, because they want to have the freedom to focus on the bigger balance accounts, without being bothered by any guarantees to perform.
And, they offer no real information on what’s being done to pursue your debts, beyond a vague monthly statement with aggregate numbers. You can’t see what’s being done on each account as it happens, because they don’t want you to know.
So, here is the situation:
1. Businesses and A/R managers hold onto their aging accounts until the last possible moment.
And,
2. Contingency-Fee firms are able to ignore smaller balance accounts with no consequences.
This is why the contingency fee collections industry achieves only a 17% average collections rate!
Then they take their fee out of that 17%, netting you, the client, around 8.5%! (on average, meaning that half of the time you don’t even get this much.)
So that $1,000 account wastes away until you only get $85 for it.
They are so expensive because their recovery rate is so low…
But, their recovery rate is so low because they are so expensive… A classic catch-22.
It’s the system.
All the benefit is stacked on the side of the contingency-fee company, and all the cost is on the side of the business owner.
A better way
25 years ago, we recognized that the system was broken, and built a new one from the ground-up.
We charge a low flat fee, and guarantee our performance, why?
Because we charge an extremely low flat-fee, you, the business owner, are now actually incentivized to submit it while it is still fresh!
Because it doesn’t cost you an arm and a leg, you want us to go after them for you as soon as possible! (all the benefit of early submission, without the usual high cost)
It costs the same to submit them at 30 days late as it does at 300 days late!
Let’s use the same numbers from the above example.
If it is a $1,000 account, it will cost you $35 to submit it. Period.
And, we are incentivized to go after each and every account you submit to us, because of our guarantee to recover every account or you get to replace it free of charge!
It’s the system. It harnesses the power of incentive to benefit you.
In fact, if you implement our comprehensive Cash Management System, you will see a recovery rate of well over 80% on all past-due accounts!
You will also see your on-time payments skyrocket, because you can focus like a laser beam on getting those fresh accounts paid before they become past-due.
The system works.
Our recovery rate is so high because we’re inexpensive, and charge a flat-fee.
It’s the only way a recovery system can work to its maximum potential.
And we’ve built many features in to the system to safeguard its success including:
• 100% access to real-time account activity via dedicated web portal
(you can see everything at all times, complete accountability)
• Every penny is sent directly to you,
(we do not delay, intercept, or take a percentage of anything)
• You dictate the tone of the campaign, in order to preserve your client relationship
(no more rude collectors alienating your customers)
These contingency fee companies grow their profits at the cost of yours.
Their system is broken.
Put your business ahead of theirs, and implement a recovery system that actually works, because it was designed to benefit you.
Call today for a free Recovery Analysis to find out just how much money we can free up for your firm within the next 30 days.
Everyone acts according to incentive.
This is why many businesses choose to pay sales staff primarily by commission, so that the sales staff will have an incentive to close sales for their employers, and bring in more profit for the firm.
By building incentive into the system for their sales reps, they align their interests and ensure mutual benefit.
The trouble is, businesses (and their vendors) are actually disincentivized to do what is best for that business in the Accounts Receivable (A/R) Department.
But it isn’t obvious how.
It will take a little bit of work, but this report will walk you through, step-by-step, how your A/R department is losing you money every day, because of how incentive is mis-applied, and what you can do to fix it.
Part One:
The Business
Imagine you are a business owner.
You have a healthy business, with a pretty good Accounts Receivable department chugging away, issuing invoices and collecting payments.
But some of your clients don’t pay right away. In fact they can go pretty long without paying, and eat up a lot of your resources while you try to collect the debt.
You are referred to a third-party collections company that has agreed to collect all your bad debt for you without you paying anything at all unless they do collect. But, if they do collect, you have agreed to split that amount 50-50 with them. (A “contingency-fee”)
Sounds good so far, but consider this:
Studies have shown that, on average, accounts typically lose around 10% in value for every month that goes by without it being collected.
So, in round numbers, your $1,000 account is worth maybe $900 after 30 days, $810 at 60 days, etc…
At 12 months late, your accounts are only about 22% recoverable.
At some point though, you have to hand the account over to your collections company so they can initiate their collections efforts, before the value goes to zero, right?
But when?
You’re not going to do it at 30 days late, when it is still highly likely that your client will pay you, right?
That would be like giving away $450! (Since they would keep half of what they collect and its worth about $900 at this point)
What about at 60 days late? - It’s worth $810, so it will cost you $405 - no way!
Why would you? They are bringing very little value at this point but they still get a huge paycheck for doing what you probably could have done without them.
90 days late?.. 120 days?.. 360?..
You can’t submit it to them when it is fresh and still highly recoverable because that would be far too expensive, and essentially giving away your profit margin (or more).
Instead, you are forced to hold on to these accounts because you can’t afford to pay this company to collect on accounts that are only a little bit late.
You have to wait until you are sure that you aren’t going to be able to collect it yourself, before you turn it over to this company, or else you will end up handing over so much “good” money to chase the “bad” it isn’t even worth it.
Part Two:
The contingency collections firm
Now imagine that you are instead an owner of a contingency fee based collections firm. In fact, you own the very firm in our previous example.
You keep 50% on anything you are able to collect.
You have developed a pretty sizable client base and get a steady steam of past-due accounts.
Let’s say that one month you get a $100,000 account from a large IT firm. You also get ten $10,000 accounts, and a hundred $1,000 accounts.
Which accounts do you think you would focus on? Definitely the $100k account first, right?
Then the ten worth $10k? Of course.
Two-thirds of your potential profit is in this top eleven percent of these accounts.
Because you are paid based on what you collect, and because these accounts have much more money in them, you are incentivized to focus on these larger accounts.
Also, because you don’t have any accountability to your clients for how you choose to pursue the past-due amounts, you can basically file the smaller ones away to follow up on once you are done going after the big balances, if ever.
This is called Account Skimming, and it is very common in contingency fee firms.
But, what about those businesses that submitted those smaller balances?
What if all those $1,000 accounts that are 6 months late are yours, and you really need to get as much as you can out of them?
But it’s not going to happen because all of their time is spent on the bigger balances.
Because they, like you, want to make as much profit as they can, and that’s where the most potential is, in those mega-balances.
In addition, they are incentivized to use any harsh means to collect they see fit, since they don’t care about your relationship with this debtor, they just want to get a check out of them.
They also offer no peformance guarantees, because they want to have the freedom to focus on the bigger balance accounts, without being bothered by any guarantees to perform.
And, they offer no real information on what’s being done to pursue your debts, beyond a vague monthly statement with aggregate numbers. You can’t see what’s being done on each account as it happens, because they don’t want you to know.
So, here is the situation:
1. Businesses and A/R managers hold onto their aging accounts until the last possible moment.
And,
2. Contingency-Fee firms are able to ignore smaller balance accounts with no consequences.
This is why the contingency fee collections industry achieves only a 17% average collections rate!
Then they take their fee out of that 17%, netting you, the client, around 8.5%! (on average, meaning that half of the time you don’t even get this much.)
So that $1,000 account wastes away until you only get $85 for it.
They are so expensive because their recovery rate is so low…
But, their recovery rate is so low because they are so expensive… A classic catch-22.
It’s the system.
All the benefit is stacked on the side of the contingency-fee company, and all the cost is on the side of the business owner.
A better way
25 years ago, we recognized that the system was broken, and built a new one from the ground-up.
We charge a low flat fee, and guarantee our performance, why?
Because we charge an extremely low flat-fee, you, the business owner, are now actually incentivized to submit it while it is still fresh!
Because it doesn’t cost you an arm and a leg, you want us to go after them for you as soon as possible! (all the benefit of early submission, without the usual high cost)
It costs the same to submit them at 30 days late as it does at 300 days late!
Let’s use the same numbers from the above example.
If it is a $1,000 account, it will cost you $35 to submit it. Period.
And, we are incentivized to go after each and every account you submit to us, because of our guarantee to recover every account or you get to replace it free of charge!
It’s the system. It harnesses the power of incentive to benefit you.
In fact, if you implement our comprehensive Cash Management System, you will see a recovery rate of well over 80% on all past-due accounts!
You will also see your on-time payments skyrocket, because you can focus like a laser beam on getting those fresh accounts paid before they become past-due.
The system works.
Our recovery rate is so high because we’re inexpensive, and charge a flat-fee.
It’s the only way a recovery system can work to its maximum potential.
And we’ve built many features in to the system to safeguard its success including:
• 100% access to real-time account activity via dedicated web portal
(you can see everything at all times, complete accountability)
• Every penny is sent directly to you,
(we do not delay, intercept, or take a percentage of anything)
• You dictate the tone of the campaign, in order to preserve your client relationship
(no more rude collectors alienating your customers)
These contingency fee companies grow their profits at the cost of yours.
Their system is broken.
Put your business ahead of theirs, and implement a recovery system that actually works, because it was designed to benefit you.
Call today for a free Recovery Analysis to find out just how much money we can free up for your firm within the next 30 days.
09 January, 2009
How to get the money flowing again, in spite of the economic slowdown.
Have you heard of the 80/20 rule of business?
I'm sure you have. I was freshly reminded of it, in a conversation
with a colleague the other day. And, it got me thinking...
A few years ago, researchers discovered a principal that seemed to
hold true across every industry - from sole proprietors to Fortune
500 companies - consumer behavior, administrative functions,
employee resources - they all are subject to this rule:
That 80% of results come from 20% of actions.
20% of your product line will be 80% of your sales.
20% of your time will bring in 80% of your revenue.
20% of your resources fund 80% of your profits.
This begs the question: what are those "80%" activities that are
responsible for the 80% of your profits?
Also, this means that all the rest of your efforts are only
affecting 20% of your profit.
Successful businesses have found that by focusing on the "80%"
functions, they can improve their bottom line very dramatically,
very quickly.
And, since it only takes 20% of the effort, improvements can be
made quickly and easily.
What are your businesses "80%" activities?
There is a big one that may surprise you.
It is your Accounts Receivable Department.
Many businesses are bleeding money out of their A/R department
because of outdated methods and out of control costs.
I wonder how much profit you could save just by making a few
simple adjustments.
Below you will find a couple of blog posts I've written that will
help you focus on the 80% that can reap huge rewards by boosting
bottom line profitability.
I think they will be helpful.
Drop me a line if they are, or if you would like to talk through
your specific company's processes to see how we can get that 80%
rule working for you.
Bob Blackburn
Managing Director
Cash Recovery Network
I'm sure you have. I was freshly reminded of it, in a conversation
with a colleague the other day. And, it got me thinking...
A few years ago, researchers discovered a principal that seemed to
hold true across every industry - from sole proprietors to Fortune
500 companies - consumer behavior, administrative functions,
employee resources - they all are subject to this rule:
That 80% of results come from 20% of actions.
20% of your product line will be 80% of your sales.
20% of your time will bring in 80% of your revenue.
20% of your resources fund 80% of your profits.
This begs the question: what are those "80%" activities that are
responsible for the 80% of your profits?
Also, this means that all the rest of your efforts are only
affecting 20% of your profit.
Successful businesses have found that by focusing on the "80%"
functions, they can improve their bottom line very dramatically,
very quickly.
And, since it only takes 20% of the effort, improvements can be
made quickly and easily.
What are your businesses "80%" activities?
There is a big one that may surprise you.
It is your Accounts Receivable Department.
Many businesses are bleeding money out of their A/R department
because of outdated methods and out of control costs.
I wonder how much profit you could save just by making a few
simple adjustments.
Below you will find a couple of blog posts I've written that will
help you focus on the 80% that can reap huge rewards by boosting
bottom line profitability.
I think they will be helpful.
Drop me a line if they are, or if you would like to talk through
your specific company's processes to see how we can get that 80%
rule working for you.
Bob Blackburn
Managing Director
Cash Recovery Network
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