How to Get How to get back pending dues from your customer

8/4/2019 How to Get How to get back pending dues from your customer

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How to get back pending dues from your

customer

.. things they DONt teach you at MBA school

Though there are a million strategies and books on improving sales and setting

sales targets, a great sales figure means nothing , unless the customer

ACTUALLY pays the bills due in full !

The .com entrepreneurs may live in an elite world of customers willing to

sometime pay in advance (booking ticket) or atleast pay instant cash (COD) so

end up with a positive cash flow almost instantly. But for rest of the 99% of the

real world entrepreneurs , it is an often untold story of what happens AFTER

getting that BIG deal with a brand name customer a long chasing behind theaccountants and purchase managers to get paid (or laid ;-). This article is not

about issues with credit terms with the bigger guys shops, establishments,bulk

buyers of products and services- who primarly operate on some credit.

None have exploited this fact more than the branded and well known names in

business.. the small entrepreneurs and vendors are attracted like flies to moth

paper as they feel that a reputed company would never go back on their

commitment . Oh Oh Oh ! Anybody done business with UnReliance know that

only thing BIG about companies is well under the belly , and slightly above the

knee ;-) This attitude of my pussy is bigger than yours (with more women

breaking glass ceilings , and to be politically non biased) has created a vicious

ripple effect up and down the pyramid.

Since all business visions are centred around Customer is King and keeping the

emperor always in his new clothes often has ended up creating so many paupers

with no clothes on ! and once again the right balance of customer satisfaction

and operational discipline is something I learnt in the back gullies of bandra

from the guys in white topis no man, not Team Anna but the Original white

topiwallahs of Mumbai the dubbawallahs . They serve from slums to star

hotels, all with same strictness and courtesy and are quick to say No even to

Prince of England ! It takes someone to stand up and say Dudes, you are allnaked ..So here is our experiences of doing collections at eFarm .

Collections is a fine art Im not talking about Hussains lying inside some Gujju

Bhai and Koki Bens attic. Im talking of Collecting Money From Customers, after

the pre-determined due date and credit limit is far exceeded . THAT kind of

collections ! In simple words, if customer pays on time, then the entrepreneur

has cash in hand to buy more inventory , take on further orders , pay salaries

(atleast for others). But as cash flow stops, it brings all the zeal to a grinding halt

OR they run back to their investors or banks asking for capital. And desperation

is never good during any negotiation even if they raise the funds, often the

conditions are still more stringent, starting a vicious self collapse.


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If it is so critical and wide spread, then why dont we hear about this in any of the

forums ? entrepreneurship events or talks?

I feel probably, real world entrepreneurs, dont want to embarrass their

customers and ending up in self pity or writing off the losses on their books as a

learning expense . or they pass the buck down the chain . Or wait to recoverthe losses in the next customer who will walk in, using this for exposure and

reference.

So how does one go about actually avoiding this situation ? The entrepreneur

often has to do the collection rounds himself .Not only are they expected to

deliver the goods, provide the credit period but further get harassed running

from one department to another trying to get the bill passed well, you thought

private firms often have more bureaucracy than even government.

When you hear things like Oh we have to send the bills to our Head office

some 1500 kms away to get it approved, and we send it by pigeon-mail youralarm bells should start going ON. Another classic is Oh, we dont have email

so couldnt download your e-bill , can you print 3 copies of your invoices in pink

paper A4 size, single sided?. Ya man, everyone has facebook on their cells,

twitter in their TVs , and god knows how come the accounts office still run

Charles Babbages age adding machines !And of course , their corporate office

will be painting town read about Grow More Trees campaign at rate your

accounts is ripping them, you do more forests !

And then when you need to face a Purchase manager , who fancies a

correspondence MBA to impress his new CFO, start refreshing calculus totrigonometry . For this self proclaimed Junior ramanujam will start applying

every known mathematical equation to slice and dice, map your data to 20

competing vendor rates, lowest common denominators applied, and if anything

is left in dues , wont be worth the time to even cross checking their maths

wizardy in credit notes and deductions applied to the bill.

The most recent head banger of course is with some of these new age food

court kiosks in the malls. A bunch of NRIs or spoilt kids of rich dads decide to

cash in on the food retail wave in India . No harm there , but just getting an

elephant to your launch event is not going to guarantee that the customers can

also be mahouted inside the dining room unless they come for Kabab-e-

Gobar experience. Everyone wants to be the next Big Mac build one store and

make another 100 idiots (ahem franchisees) pay for the expansion just that

even the 1st cookie crumbles even before it hits the mouth.

So,Should we hire a third party collection service to do the needful ?

Collection agents immediately brings images of thugs in suits the dreaded

credit card collection agents from Private banks harassing innocent

householders. Their only tactics is just irritate the hell out of the guy till he

pays . But with lot of Supreme court norms on how this is to be handled, the

effectiveness is rather questionable .


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Beside often the person you are trying to collect from is not some middle class

Madahavan living in a Tamilnadu Housing Board. It could very well be Vijay

Mallaya oh yes sir.. the Grand big daddy of biggest bad debts and most

notorious for not paying bills is none other than the King of Fishy people. From

airport fees , to mid flight meals his dues run millions in spite of the strictest of

cost cutting - to all his bikini models that is.

Everybody fears that if they rattle the cage, their customer would switch to their

competitior .. well, , if someone is on such thin wicket that they havent yet

created a niche and strong symbiotic relationship with a customer, maybe it IS

time they start doing that making switching costs expensive. Otherwise they

dont need they dont need a competition to kill them their own lack of

innovation just did that !

But, there is hope

Probably the only people who actually pay on time (or sometimes even inadvance) are the small hoteleirs and road side eateries (kai yendhi Bhavan)

seeling anything from piping hot idlis to burger Pavs. As their ops cost is lowest,

and they know customer tastes the highest, and the chef and the

businessman is a one-man startup, they are profitably run. And if business

starts to dull in one spotl, the next killer location is just a push cart roll away.

With the new food safety drives trying to kill the road side food experience, must

say, we are actually killing the ONLY successful Indian food chain which is

Profitably running for generations. Yes, they may need some tweaking up

scale , but if the Mumbai chowpatty chat wallahs area proof the biggestbandra celebrities would be standing in line , while the Big Mc opposite swats

flies .

So, what are venky and Vallis hard earned tips for bringing your Account

Receivables (in lay terms- moolah from the customer) to zero defaults .

1. Like the bankers keep saying KYC Know Your Customer. It is often not

enough to know just the Purchase in charge or the Vendor Supervisor. You

also need to know the Finance department people and Heads. And

sometimes you may know the CEO, but the line managers are the once

who do day to day decisions. So , basically know EVERYONE in yourcustomer side as possible. You never know when you may need their help.

2. Follow our Sages from yore on how to handle the errant ones : Saama,

dhaana, bheda, dhandam are the four step sage advice as per our own

traditional principles of handling any people issues in stages of coercion.

Saama : persuasion if the automated reminders/emails dont work, often

a personal human call works magic as most auto reminders end up in

spam folder.Go up the decision chain to talk to senior people based on

response time.


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'Daana' means using carrot (and a stick) well, if you are in subji businesslike me, giving carrots should be a no brainer).. drop hints on whathappens if he doesnt bite the carrot ? Make it clear.

'Bheda' means 'creating rift', manipulating or mismanaging relationships.

Start rocking the boat, stop deliveries. Pain travels faster in a large

organisation than pleasure. You may be doing fantastic work, but the CEOwont know. When you stop, he will come rushing to meet you.

'Danda' means punishment : Well, one can go legal (or hire some local

goon to breaka few legs)- but these are messy . But in modern tech

connected world, several simple and innovative options are cropping up of

how davids beat Goliaths with nothing more than a few tweets , a rough

cut video or a picture even !

Most business establishments now are actively tracked and reviewed and promoted in

various portals like burrp, mouthshut etc., End customers do check product reviews and other

user experiences before dealing with an unknown entity.With SEO and social marketingbecoming the norm , no one can ignore a bad online PR today. And if you are idling like me,

waiting for the customers to complete their quarterly audits ,monthly reviews,annual

vacations to get your weekly check, then you can try writing lengthy articles like this. It may

not work in short term, but some publisher may just find it funny and I may become the next

Chetan Bhagath.

The most classic in recent times if of course the United Breaks Guitars case . How a normal

flight passenger who saw his expensive guitar had been mishandled broken by the airlines

and further appalled by their apathy. The Youtube link says it all :

http://www.youtube.com/watch?v=5YGc4zOqozo. It is now a legend , having sequels and

many others trying similar power of internet to bring giants to knees.

One strange thing I have realised that as a small entrepreneurs , we are actually the biggest

financiers and angel investors in the customers we actually try to serve. We provide the

inventory free, we provide the customer a cash float for no interest and are happy to even get

negative ROI to just keep making more investments into a wealthier company . Technically

the small companies are unknowingly funding the Bigger companies, when it should be the

other way around ! The typical logic ofcourse is that, initial losses would be compensated by

future gains through references but the credit cycle just gets bigger and riskier as you take

larger customers.

One thing which was suggested recently by one of our advisors, was to take a deposit from

the customers and actually not work with someone if they dont pay up ahead. At that time I

was obviously less enlightened and pooh poohed this as a blasphemous concept. I stand

corrected .Karthik. I take back all things I said about Wharton ;-) Though it seems a bit

pushy to ask your customer for a startup advance or loan , if he is unwilling to put that

initial capital then two things are possible. Either your product/service isnt critical enough

for him to take that risk , which means you need to go back and make your service that much

better they cant live without it. On flip side, maybe he isnt financially stable enough to even

offer that small float and himself running on fumes, so you need to take a call.
http://www.youtube.com/watch?v=5YGc4zOqozohttp://www.youtube.com/watch?v=5YGc4zOqozo


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Closing remarks :

If you are an entrepreneur, and facing similar issues, or know someone in such situation, feel

free to forward this note .

And if you are a CFO, and work with vendors, please do realise that jumbling with the assets& liabilities in your monthly report may make your presentation look charming , but just

know that someone higher than you in the food chain is drawing YOUR chart right now.

The author : venkat ([email protected]) is Founder of eFarm , an agri supply chain startup

working to enable farmers Reach markets thru innovative blend of on ground processes and

offline technologies.
mailto:[email protected]:[email protected]

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How to Get How to get back pending dues from your customer