About the Author
The President of ChannelCorp, Bruce Stuart is a Certified Management Consultant with experience in the computer hardware, software and telecommunications markets of more than 40 countries. He has authored in excess of 300 articles and eight books on the subjects of building channel partner business value and improving vendor channel strategy. He is a world renowned executive educator and strategic management consultant.

ChannelCorp Workshops
ChannelCorp provides Executive Education to vendor and channel partner management. Public workshops take place in Asia, North America and Europe. In-house workshops take place throughout the world. For more information, go to the Workshops section of www.ChannelCorp.com.

- Download this article as a PDF file

1.3 Shipping Solutions

Many solution provider receivables problems were problems before they were shipped. Many others are created by sloppy customer evaluation and/or sloppy or nonexistent shipping policies. This article focuses on three shipping-related aspects of reducing receivables problems:

avoid problem customers

no shipments without Purchase Orders or Purchase Order numbers

no shipments without invoices

Avoid problem customers
Do you have a profile of the characteristics that are shared by your best customers? Do you have a list of “danger” signals that are associated with your worst customers or any of your current accounts receivable problems? If another potential problem customer wanted to purchase products or services from you, would you recognize the client as a potential problem and take appropriate measures? The best solution providers in the business practice a form of customer selection or client discrimination. In order to begin to systematically avoid problem customers you must recognize them. Try the following:

review your best and worst clients to understand what makes them best or worst

define, in writing, the characteristics of you best customers so that your salesforce will recognize one when one is met

define, in writing, the characteristics of your worst customers so that your salesforce will recognize one when one is met

define a procedure for making potential problem accounts pay early (deposits/prepayments/structured bills and payments)

define the point at which your company will decline to sell to an existing or new account identified as a problem

No shipments without purchase orders
From time to time we get the opportunity to work with solution providers in a “turnaround” situation or with the implementation of a receivables reduction program. What we find is an extremely high correlation between old/uncollectable accounts and products that were shipped or services that were rendered without a Purchase Order or Purchase Order Number from the client.

In most cases, there was no intent by the customer to defraud the solution provider. Very often the customer didn’t have budget available during the quarter in which the products/services were supplied. However, the resultant delay in payment does cause financial hardship for the solution provider concerned. The reasons that no shipments should be made without Purchase Orders or Purchase Order Numbers are straightforward:

the Purchase Order/Purchase Order Number is evidence that the customer is willing to purchase and that budget monies are available to pay the bill when it comes due

most purchase order management systems will not create a Purchase Order or make available a Purchase Order Number unless budget exists

creation of a Purchase Order or the reservation of a Purchase Order Number reserves budget monies

When times are tough, and your customers’ budget money is disappearing like the days of the week, it pays to ensure that the budget is in place to pay your bill . . . before you ship the product and deliver the services.

No shipments without invoices
It seems like common sense for invoices to accompany shipments or deliveries. However, let us review a common schedule of events:

February 1 - Order shipped to customer
February 21 - Customer billed for Feb. 1 shipment
(21 days after shipment)
February 28 - Invoice received by customer
(28 days after shipment)
April 14 - Invoice paid by customer
(70-75 days after shipment)
April 21 - Cash deposited in bank by solution provider
(75-80 days after shipment)

The schedule outlined above is a prescription for an Accounts Receivable investment in the range of 60-80 days.

The key to reducing the above 60-80 day investment in receivables to a 25-45 day investment is the decision by solution provider management to include the February 21 invoice with the February 1 shipment. Simple stuff but powerful. Remember, a reduction of receivables investment by 30 days means the freeing up of approximately $83,000 in working capital for every million dollars of revenue. Interest savings of approximately $13,000 accompany the reduction in receivables investment by 30 days when calculated on one million dollars of revenue.

In summary, many receivables problems can be avoided at the pre-shipping/shipping stage of the sales process. Work hard to avoid problem customers (or make them pay), don’t ship without Purchase Orders or Purchase Order Numbers, and don’t ship without including the invoice for the shipment. The next article in this section focuses on invoicing solutions to receivables problems.

- Download this article as a PDF file

The foregoing document has been excerpted from the 6th Edition of the Reseller Management Handbook, available for $100.00 U.S. from ChannelCorp Management Consultants Inc.

ChannelCorp Consulting services
ChannelCorp provides strategic consulting in the areas of channel economics, channel strategy, channel marketing, channel development and channel management to hardware, software and peripherals vendors around the world. ChannelCorp is also widely recognized as one of the industry’s leading authorities in the areas of reseller and solution provider profitability improvement.

ChannelCorps’s management consulting expertise is built on a solid foundation of fifteen years of researching and analyzing the evolving business models and marketing strategies of the vendor and solution providers worldwide.

Suggested Reading
For more information on the topics covered in this article, you should consider purchasing The Channels Handbook and/or The Reseller Management Handbook. For more information, go to the Products section of www.ChannelCorp.com.

Availability
ChannelCorp can make our copyrighted materials available to your organization for inclusion in your corporate newsletters and websites.

For information on republication, contact Bruce Stuart - channelcorp@telus.net

Back to ChannelCorp Intelligence

TOP of PAGE

HOME

channelcorp@telus.net