Friday, July 1, 2011
Thirty Years of Jobbers – Chapter 3-4
When customers switched from ‘Balance Forward’ to billing by invoice their collection periods dropped dramatically. If you bill by invoice, try to avoid giving customers more than ten days to pay and on the eleventh day, if you haven’t received their payment, give them a friendly call.
I once had a client with an accountant named “Ruben”. Ruben was a tough old bird and each Monday, Wednesday and Friday, he would get on the phone and call every customer that slipped past the ten day column from a report I created especially for him. Would you believe that some jobbers, even today, still bill “Balance Forward?”
I don’t see how jobbers can continue to work with a canned software program. It seems like we get requests for modifications and new programs every week. That’s one of the greatest advantages of being on “The Cloud.” I can make an adjustment or add a new program in the morning, and in most cases the customer can start using it that same afternoon.
Ruben’s report presented him with a list of invoices by customer, oldest days first. You look at that report every day for a month and it might give you an ulcer, but your bank account will get fatter, FAST! We all know about life being a tradeoff.
Over the years, jobbers inherited "old systems" from family operated businesses. These systems relied on mostly quarterly financial statements to determine the enterprise's overall financial health. When you see how one customer can cause a $360,000 loss in less than two weeks, it's reasonable to assume that jobbers and convenience store operators need a better method of managing their businesses.
One solution is a tool we created that allows daily monitoring of all receivables, not just those that fall within our interest. Then we can use the computer to identify suspicious variations that will trigger software which can alert us of potential problems before they become permanent catastrophes.
When a single customer provides us with a high inventory turn, for instance 100,000 gallons a week, we need to monitor for any changes in volumes delivered, payment methods and periods, profit analysis, anything and everything that could signal a "change in habit". Changes in habit don't happen without reasons. These reasons may be innocent, but then again, they might spell T-R-O-U-B-L-E.
For instance, one jobber who was monitoring deliveries happened to notice a subtle drop in gallons ordered by a single customer during a one week period. By comparing these figures to previous patterns and patterns of other customers during the same time period, the differences were enough to stand out. Eventually, it was learned the customer, leveraged to the limit, was bringing in fuel from other suppliers in an effort to expand his line of credit.
Payment habits, changes in collection periods of one or two days, gallons ordered, frequency of deliveries - all of these indicators and more can tell you a lot about your customers.
But who has the time to monitor these figures day in and day out? Depending upon your volume and number of customers, it can become humanly impossible to keep such a system operating on a regular basis. Without the right tools, you can quickly get into trouble. The economy is getting worse. You need to start looking for indicators that might reveal impending disaster.