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Apr 01 2016
Back Up Your KIGS
Tyler Steenblik,CCE, YESCO

Some things never change. Since the beginning of time, credit people have suffered from what is commonly known as KIGS or KNOT IN THE GUT SYNDROME. We all know the routine. We approve an order and hold our breath until the check comes in. We can review credit applications, analyze financials, pull credit reports and even check with the customer's mother, but ultimately we have to wait to see the outcome. Meanwhile, the makers of Maalox and Tums continue to collect their fees.

On the other side of the fence sit our customers. In many ways they are no different than us. They review their cash needs and make decisions. When the available cash is not sufficient to pay everything, they make decisions just like we do. We need to somehow get our invoices into the "WILL PAY" stack.

Depending on the product or service we provide, our starting rank or position to get into that pile will be drastically different. For example, the utility companies, the mortgage company, the car loan company has a lot more leverage than a service provider who will not need to make another visit for a few more months.

Regardless of where we start on the pecking order of bill paying, there are several things that can be done to boost our starting priority positions. The squeaky wheel routine, relationships fostered over time, interest charges and other penalties we impose, the potential for repossession, etc., are all arrows in our quiver. Wouldn't it be nice, however, if we could bypass the need for these and make them a non-issue . . . or in other words, get our invoice in the good pile before we need to start shooting the arrows?

If we want to boost our customer's priority on our behalf we need to be prepared to use all strategies available to us and make a conscientious effort at the front end of the sale. This article will suggest a few strategies that can be done prior to the order going out the door. In many cases, these can help so there will not be a collection problem. These strategies take some extra effort but can reap great rewards and prevent the hassles we too often face.

Complete and Accurate Information


It is critical that our sales people get us the correct information. How often do we find out after the fact that we missed important billing information? Maybe the customer needs a product warranty card before payment can be made. Perhaps photos of the completed job are needed at headquarters. Many companies need lien waivers. There are hundreds of possible questions to ask and even the best customer won't pay until these items are completed. And let's not forget that the customer can't pay if the invoice goes to the wrong address! It is vital that we check the information thoroughly even though it takes time up front.

The point is that we need to do our homework on the non-credit issues as well as the standard credit checklist. It is easy to point fingers at the sales people for not supplying a credit application but let's remember that if we don't do our jobs, it has the same result - no dollars for us!

Pre-Shipping Calls

Talking to the customer personally before our product goes out often helps prevent a collection issue. We have all experienced the knot in the gut while reviewing a credit application or job order. You shake your head as you remember what happened the last time you approved a job for this customer! It doesn't take very long to get a sixth sense about potential problems. When this happens, it is wise to get on the phone. It is very easy to approach a customer by saying, "I have a few concerns before we send the ordered items." Explaining that you are a little nervous about getting timely payment for the new order will give your customer a chance to sell you on their intent to pay you. You can receive a personal commitment that this and future orders will be paid as per the terms agreed upon. If you are talking to the controller or head honcho, they will almost always see to it that your invoice makes it to the "WILL PAY" pile. She now has her good name attached to a commitment. A pre-shipment call is worth ten post-invoice collection calls!

This strategy sometimes scares the sales person and sometimes the customer will question your company's dedication to the relationship. This is infrequent, however, since this is not a demanding call. You are simply expressing your concerns. As you explain that your purpose in calling is to ask them to help you feel better and put your mind at ease, they will feel your commitment to the relationship. If you didn't have the commitment you wouldn't be calling and they would probably not be receiving the shipment.

Special Processing


It seems that any time an internal procedure is circumvented, it opens up a can of worms. Most company procedures have evolved through the years and there are good reasons for them. Trying to skip a step or change a process for one order can cause a lot of grief and much exposure. This is especially true when there are many people in your organization, because it is extremely easy to drop the communication ball. If you find yourself dealing with special circumstances frequently, it is probable that major sections of the process need to be redesigned. At least you should set up a policy to deal with those pesky orders that don't fit the standard system. It may take a lot of work, but it can save much pain and suffering later.

Electronic Payments

ACH and credit card payment terms can offer huge benefits when dealing with shaky customers. Many of these customers make better commitments before the product is shipped. Therefore, use that time when both sides are saying "Yes" and get that credit card sheet up front. It is more time consuming on the front end to set this up, but it is very well worth the effort.

You can also use these authorizations as contingency plans. If a customer wants to make payment by check, that's OK. If the payment doesn't come by the 15th however, the pre-authorized contingency plan allows you to pull the payment.

In closing, collection problems take a lot of time, money and tons of psychological will power. Even when collections are going well, there always seem to be situations in which we shake our heads and swear we will never let something like this happen again. 

While these suggestions take time and energy at the beginning of the sale, they can add a measure of security that would otherwise not be there. Hopefully they will be useful to you in your efforts.