Collecting from Accounts Receivable

Here’s a scenario straight out of the sales guy’s worst nightmare:

Last year ended with you on top of the world. After sucking wind and having to withstand constant scrutiny from your paper pusher sales manager,  public heckling from your sales VP, and worst of all “kindly advice” from that braying jackass rep who is killing it this year, on December 31^st you bagged the first million dollar deal in your small software company’s history. Against all odds, the General Counsel of ACME Bureaucratics Corporation (ABC) finally caved on the Force Majeure provision and signed the contract. Get out the goggles and the plastic wrap, b^tches, there’s a new top dog in town! Who’s getting his Porsche back?

Fast forward to April. Everything has returned to normal (what have you done for me lately). The IRS took a filleting knife to your commission check, but it’s still good to be the man. You notice an email from someone you vaguely recognize from the company cross functional meeting (which you slept through) with the subject line “Invoice GM3847&456284#648373-6465-38.” It turns out that ABC, with reported revenues of $50B last year, is 90 days in arrears. Your new VP of Sales (it has been 4 months, afterall) is suddenly at your IKEApod toilspace talking about “clawbacks.” If you want to stay out of debtor’s prison and keep your job, it turns out that you are going to have to go back to ABC and collect on your contract from a whole new set of Far Side characters.

With the economy going south, cash is king and companies are delaying payments. Unfortunately for salespeople, accounts receivable people are not paid on commission- so guess who ultimately needs to collect the check? Willie E. Coyote, meet your deal, who will be represented by the Road Runner. Get ready for the potentially spirit crushing  chase of your life- performed while still trying to get new deals and make your new number. I have more experience at this than I would like--in fact I am literally working a Jigsaw customer collection on behalf of one of our reps this very moment.

Here is some unsolicited advice that I can offer on this topic:

-          Plan for this event. I know that delayed gratification is next to impossible for a sales type, but that is the only true way to avoid an unexpected 2x4 to the face. Make sure you know exactly how bills get paid and you have a person to call when payment is one day late.

-          Enlist your customer’s help- early. It’s his name on the contract, he bent you over when he wanted something, and now his company isn’t going to pay? That ain’t right by anyone’s standards. (If you sold a bad bill of goods or your deal got delivered by the B-team then shame on you--you’ll have to go it alone.)

-          Send the invoice yourself. Hey--you already do everyone else’s job for them before the sale; you might as well ensure that you oversee the part where you get paid.

-          Don’t panic. Account receivable/payable people (don’t take this the wrong way- I LOVE EVERYONE IN FINANCE) are congenitally unable to do communicate in anything other than official looking emails. A simple telephone call to the correct bean counter usually can shake loose your check--or at least get it to the top of the pile. The few in- person visits I have made to a customer’s finance department have been enormously personally rewarding.

-          Know your adversary. You have a contract, which is the core building block of the finance person’s existence. They secretly feel guilty that they aren’t honoring their commitment. Work that emotion.

-          Don’t waver. Every CFO thinks that his people paid too much. Often they will put up some token resistance and the weak sales guy will instinctively flinch and lower the price. Don’t be that pansy. The price negotiation is already done, Stanley, so pay up.

If done right, collecting on contracts shouldn’t be that difficult. It might be a time consuming exercise for a large company, but the knowledge gained is a valuable asset- 4 years after I got my first contract from an airplane manufacturer I had vendors and actual employees calling me for advice on how get something through their Byzantine purchasing process.