Great Wall
How coaching helped business owner recover delayed payments and ease out cash flow issue.
Business continuity and profitability are often held at ransom by the harsh reality of delayed payment cycles in the SME segment. That is mainly because SMEs work on very competitive profit margins and are often dependent on collections for their working capital. According to a survey conducted by Greyhound Knowledge Group, 79% of SMEs covered revealed a cash flow problem by stating lack of easy finance and credit instruments. Delayed payments lock up about 15 -20% of SMEs revenues and result in cash flow deficits. This compels them to resort to loans with high interest rates to meet the cash flow demands. High interest rates in turn impact the bottom lines of the business and impact the company’s profitability. In this case study we present the case of one of our esteemed clients who made a remarkable recovery of outstanding payments in just two months and dramatically changed the bottom –line.
Challenge
Our client, a flourishing company into services domain with large corporates, enterprises and government establishments as clients, faced the problem of huge outstanding payments from their clients. Despite being an established company with good standing in the market, the colossal amount of pending payments was putting the management under pressure to raise funds and committing executive time and bandwidth to resolve the problem. The problem became so severe that the CEO swung into action and implemented the following measures to mend the situation.
- Payments were quickly prioritized and a monitoring process was defined.
- Dedicated resources were allocated for accounting and recovery.
- CEO conducted reviews Twice a Week to ensure focus.
- Management even toyed with the idea of going legal with some of the customers.
Despite such phenomenal efforts for more than eighteen months, the results were not encouraging.
Solution
Since the client had already taken preliminary steps, ActionCOACH Milind decided to redefine the problem and change the direction of the efforts for quicker results. He did this by posing questions to the client which helped him identify the concern areas in the efforts being taken.
What was causing the internal bottleneck in achieving results? Post discussion, CEO quickly realized that one of the two dedicated resources had his existing work load along with added responsibility of recoveries. CFO & CEO’s personal involvement did not make it any easier for them particularly as they were young resources. The list of clients was dauntingly long for them.
What could be done to resolve the bottleneck? Once the problem was identified, ActionCOACH Milind helped the client find the best solution, which was distributing the responsibility across the organization for faster outcomes. Getting more employees involved in the process was the answer.
Identify who could contribute to recovery process & Why. Best resources to help in recovery were the thirty field officers. They were the best choice as they met the clients regularly and could handle the additional responsibility of recovery. A quick discussion with the ActionCOACH also helped client realize it was more effective to share the load of 300 customers with 30 officers Vis a Vis 2 employees. The client and ActionCOACH also discussed and agreed on ways to ensure smooth working of the process.
What was the most effective way to assign the responsibility? By now the client was aligned to the logical flow of decisions and decided to list out the customer base – area wise, and then allot them to the field officers.
What could be done to help them succeed? Planning & Execution…! It was decided to conduct the recovery activity in a very planned and organized manner by fixing weekly targets individually for 30 officers, setting priorities, conducting weekly meetings, ensuring availability of documentation to the team, providing support of Billing & Recovery executives and initiating Rewards & Recognition for achieving targets.
What about bad debts? Client agreed with ActionCOACH to review these cases one by one with the senior team and prepare a separate game plan for each one individually and initiate corrective actions.
Results
It did not take long for the results to show. It took just one coaching session to resolve eighteen month old severely critical issue. The company surpassed their previous recovery performance and grossed highest recoveries in just two weeks. CEO could now focus on business growth without worrying about cash flow issues.
Lessons Learnt & Implemented For Greater Success.
- It was obvious that recovery activities needed to be regularly conducted and that operations teams were best geared for it. So this was introduced as a KRA to their profile.
- KPIs were also revised accordingly.
- Controls and Review points were identified to ensure that the outstanding aging was controlled.
- Remarkably, 60% of old outstanding was recovered in just one month and POA for balance 30% was prepared for recovering it in a month’s time. Approximately 10% being bad debt, the management decided to explore best alternative to recover the same.
- That’s not all, the data analysis conducted for this exercise helped identify another opportunity to increase profits!
Take Aways
It did not take long for the results to show. It took just one coaching session to resolve eighteen month old severely critical issue. The company surpassed their previous recovery performance and grossed highest recoveries in just two weeks. CEO could now focus on business growth without worrying about cash flow issues.
Lessons Learnt & Implemented For Greater Success.
- It was obvious that recovery activities needed to be regularly conducted and that operations teams were best geared for it. So this was introduced as a KRA to their profile.
- KPIs were also revised accordingly.
- Controls and Review points were identified to ensure that the outstanding aging was controlled.
- Remarkably, 60% of old outstanding was recovered in just one month and POA for balance 30% was prepared for recovering it in a month’s time. Approximately 10% being bad debt, the management decided to explore best alternative to recover the same.
- That’s not all, the data analysis conducted for this exercise helped identify another opportunity to increase profits!
