Monday, June 27, 2011
Thirty Years of Jobbers – Chapter 3-1
If you’re sending out monthly statements there is a good chance you can make minor changes in your operation that will create $100,000 or more in additional working capital within three months or less. That's what this chapter is all about. There's gold in them there receivables, my friend. All you've got to do is bend down and pick it up. But wait… Is that going to require change?
Times keep changing and we continue to resist it. It’s human nature. We will do everything possible to hold back the tide, only to get flooded time and time again. I believe one of the major reasons businesses fail, is the out and out terror imposed by change. Kmart’s aversion to change made Walmart what it is today, a heck of a lot faster than Walmart would have been able to accomplish the same miracle otherwise.
We’ve all heard the idiom, “If it ain’t broke… don’t fix it.” If it were just us, it would be easier to deal with; but the fact is, our aversion to change is supported by almost everyone around us. Why? Because, they don’t want to change either. Things may get bad, but at least we know the consequences. We didn’t get killed, no one tried to eat us, we still have our scalps. “Whew, thank goodness for that.”
No one wants to be a “pioneer.” Those are the guys with the arrows in their backs. So if we have to change, let’s be sure everybody else we know has already gone down that path before we sheepishly follow behind; because if we fail, there will be a million Monday morning quarterbacks who will make us out to be ‘fools’ and label us as ‘stupid’.
You’ve all heard, “They can kill me, but they can’t eat me.” It’s a great pep-talk before walking into an IRS tax audit. Believe it or not, for some reason, people find that saying assuring. But change changes everything, doesn’t it? “They may kill me, but if I dare to change, they may be able to eat me after all.”
Twenty-two years ago, a customer proved to me, using the computer system I sold him, a customer could buy an $8,000 load of diesel, never pay for it, and he would never be the wiser. That's when I made up my mind to do something about it.
If cash is the life's blood of a jobber's business, then the heart of a jobber's business is its accounts receivable. With so many complicated business tasks out of your control, accounts receivable is one area where you can truly take command. Yet, most jobbers ignore their accounts receivable completely until a real problem shows up. The fact is, if you let a customer get in the ninety-day column, there's a good chance you'll never collect that money. If he hits the 120 day column, most of the time you can save yourself a lot of misery by just forgetting about it.
Some jobbers are so happy to get sales in any form, they are hesitant to do anything that might drive their customers away. When in actuality, you may be the last creditor they've got that lets them get away with the shenanigans they have been successful at pulling on you. Think about it: How much do you really make on a four-cent margin after sixty days? Is it worth it?
Most jobbers calmly sat back as their suppliers and the Federal and state governments took away their float. All the while they were carrying Farmer Brown for ninety days on a load of diesel they hauled fifty-miles and sold for two, measly cents over the rack. If you keep offering customers unlimited credit till they get ready to pay you, what's the incentive for them to pay you on time?
Next, I’ll relate a true event that happened to me and one of my customers back in 1986.