The recession conundrum: how to tighten credit practices and still increase sales.(selected topic)

When the economy gets tough, credit practices tend to tighten up. However, sales, wanting to keep the revenue stream going, often wants to loosen up the terms so that they can sell more. On one hand, you need to make sure that you are collecting on existing invoices, but on the other hand, without fueling sales efforts, tighter credit practices can cannibalize future revenue. So in essence, tighter credit practices and sales need to work synergistically, or the longevity of the company is at risk. The big question then becomes, is there a way to do both? How do you both optimize cash flow and continue sales efforts? To address these issues, leading companies are leveraging a three-pronged approach:

1. Collect on existing debt

2. Manage high-risk customers

3. Reward good customers to ensure future revenue

Collecting on Existing Debt

Optimize the Collections Process

First and foremost, you need to make sure your collections process is optimized to ensure optimal cash flow. Once your invoice enters the payables cycle, the objective is to beat out other vendors vying for payment. This is a case when experts, not junior staff, are required to meet this goal. You need an experienced team that knows how to navigate the receivables process and how to get your invoice to the top of the payables stack and paid on time--a skill that is acquired through years of practice and is as much art as it is science.