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INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | | FEBRUARY 15, 2002 FACTORY DAYS By Lisa Bergson Job No. 1: Collecting the Cash How to handle deadbeat customers? By screening them out with presale credit checks, for starters. After that, persistence is key
Almost nothing makes me madder than deadbeats. Here we are, paying up front for the people, materials, and factory overhead to make our trace-moisture analyzers, and these ignoble miscreants delay payment or, worse yet, don't pay at all. Years ago, I got so angry at one blackguard, I smashed my phone against our cinderblock wall. Lucky for him he was down in Texas. "You have the most important job at MEECO," I tell Barbara Eichensehr, our accountant in charge of accounts receivable. A soft-spoken single mother, she has the rare mix of tact and tenacity required to succeed at collections. She has them all on an Excel spreadsheet with notes. Her mantra: "Get the check number." Barbara knows her facts and follows up consistently, her deceptively girlish voice asking when the check is going to be "cut." Small wonder that she's the acknowledged "Queen of Cash" at our company's weekly "Open Book" meeting. MEET MR. MUSCLE. These days, I'm happy to delegate this onerous task to Barbara. In the past, however, I found myself dealing with some fairly egregious ne'er-do-wells. We once hired one of my best friend's cousins, a large Creole security guard in New Orleans, to take possession of one of our units from an errant gas contractor. In reality, he was one of the least threatening guys you could hope to meet, but with his uniform, gun, and 300-pound girth, he made quite an impression. Another time, I showed up at the door of a bankrupt engineering firm in Fort Worth just as they were evacuating a first-floor suite of offices handsomely decorated with rented oriental rugs and dark wood furniture. Unfortunately, the boss slipped out the window before I could talk my way past his secretary. We never got paid on that one, nor were we able to determine the whereabouts of our unit. I'm pleased to report the days of such high jinks are long gone. Under the direction of Eileen Jacobs, our savvy CFO, the whole collection process has become a lot more systematic and proactive. She contends, "The sale is not complete until you're paid." As Eileen sees it, the process starts with our salespeople, who are expected to handle the credit application when they close the deal. Being assertive up front helps keep us off customer's patsy list. A WORLD OF RIPOFFS. Thereafter, it's up to accounting to do a proper job of credit-checking to determine whether customers pass muster or require special handling. For example, there are entire regions of the world where some businesses think nothing of bilking Americans -- or anyone else, for that matter. Now it's MEECO's policy insists on letters of credit or prepayment from most buyers in the Middle East, Latin America, and parts of Asia. Doing so takes more work up front and can delay shipments, but, ultimately, it's worth it. Even reputable customers from Fortune 1000 firms and big multinationals think nothing of squeezing the little guy. Invoking 30-day terms doesn't help when dealing with a powerful key customer determined to screw you. One multibillion-dollar European multinational boasts of its 90-day payment policy. What are we going to do, have some collection agency send them a threatening letter? (Because you only get a percentage, I rarely use them. All the same, collection agencies can be effective.) We're left in the position of having to finance equipment gratis for some of the world's largest companies. Now that is not right. Big players also seem to foster a culture of evasion and obfuscation. They shield their entire accounts-payable department behind a nearly impenetrable veil of voicemail. A recorded message takes your purchase order number, with no acknowledgement. After weeks of never speaking to what Barbara calls a "human person," your only recourse is to try to track down the customer who received the unit. EXCUSES, EXCUSES. Usually, it turns out that the accounts-payable department claims it never received the bill or that there is a hitherto unknown number required for the purchase order. Similarly, you are likely to hear that the invoice could be stalled somewhere awaiting approval or a receiving report, or maybe it's the computer that doesn't recognize us as the vendor since the order was placed through our local independent sales rep. These people must have had dogs eating their homework from a very early age! In light of such obstacles, I credit Eileen's and Barbara's diligence and the quality of our customer base for the fact that our collection experience is relatively good, with only 4% of our total accounts receivable set aside for bad debt and 3% in the over-60-day categories. A standard collection metric, our days sales outstanding (DSO), averages 45 days. All of which begs the question, how are we as payers? Given the economy, Eileen has stretched out payments of late, with Dun & Bradstreet rating us 14 days beyond terms. "I'm surprised -- we've only gotten one call in the last five months," she says. When business slowed, she asked our key vendors for extended terms -- and got them.  Lisa Bergson is president and CEO of both MEECO and Tiger Optics. Before joining MEECO in 1983, she worked as a business journalist at BusinessWeek and freelanced for many business publications. You can visit her companies' Web sites at www.meeco.com and www.tigeroptics.com, or contact her at lbergson@meeco.com Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | FEBRUARY |
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