Generating Cash in a Turnaround
When a business is in difficulties it needs to find a way to swiftly and effectively turnaround.
They need to look at optimising costs, monetising assets, maybe innovating products and services, strengthening customer relationship management and looking at strategic partnerships and alliances.
But above all, they need to manage their working capital and reduce their debts. Without money, they cannot do any of the other things they need to do, and at Credebt we specialise in generating cash quickly and effectively, even in the direst situations.
We are happy to share our process with you in this article, or we can help to do it for you.
Step 1: Crisis Management
The first step in any crisis is to get a good overview of the exact situation.
Do a comprehensive Debtor Collateral Review where you look at the Order to Cash Process, the Aging profile of the Ledger, movements over the last months, the DSO, details of any queries and backing paperwork, as well as the staff and procedures.
Step 2: Taking Control
Next you need to take control of the situation.
Verify any outstanding balances to get the true value of the Ledger, monitor the collections, resolve any queries there may be, eliminate bottlenecks in the Order to Cash process, tidy up the Ledger and start recovering the outstanding debts.
Step 3: Generate Cash
To generate as much cash as quickly as possible, make sure that the staff have lots of industry experience, they know what processes to use, stick to the time frames, use the correct letters, have the right contacts, have adequate resources and continue to follow up until the debt has been repaid.
Use a formal Collection Process whereby you always send letters (either physical or by email), use cause and effect chasing, keep your promises and stick to the dates you agree.
Deal with queries, write off old debt, raise credit notes and send supporting paperwork as required. That way you will transform the aging profile and get better results from your collections work. You will know that everything you chase is valid and due to be paid, be confident that people will pay and that queries have been dealt with.
Once all that has been done, you need to optimise the Order to Cash process. This starts with credit checking customers before they are offered any credit, invoicing promptly and correctly, and sending those invoices to the right people. Make sure that the appropriate backing paperwork is included, and that you know exactly what is required for the order entry.
Negotiate better terms with your customers so that they stick to YOUR payment terms, and you are not dancing to their tune (even if they are large companies).
Step 4: Process Improvements
Finally, you need to write a robust Credit & Collections policy, report on the current and future position, recruit and train the right staff and possibly have an organisational restructure to ensure the continued success of the company.
How can we help?
Remember that we are the experts in this field and we are more than happy to help you with any issues you may have.
Feel free to contact us for a no obligation chat in total confidence, or arrange your Free Debtor Collateral Review to find out your Position.
Call us on 0845-6385256 or email info@credebt.co.uk
