Foresight

Henry R. Luce said, "Business, more than any other occupation, is a continual dealing with the future; it is a continual calculation, an instinctive exercise in foresight." So let's talk today about foresight in respect to credit and collections or accounts receivable.

If you are a regular reader, then you may be starting to realize that I "harp" or "preach" about having a plan and sticking to it quite a bit. Here's why; If Benjamin Franklin was right and a failure to plan is a plan for failure, then I would have to say that if you plan and still fail, your failure could be because you deviate from your plan. Yes business is an exercise in foresight, but you cannot forsee everything. That is why there has to be controls in place for those situations that are not forseen. There is no way of knowing who will and will not pay, for sure. Yes, we can look at trends and credit reports, check credit referrences, etc. What about that company that has been a good paying customer of your for years, but because of a quirk in the economy they are suddenly facing bankruptcy?

These are the types of situations that a good plan can help you avoid much of the time. If your A/R policy dictates that every customer that goes 30 days past-due gets a call and a copy of the invoice stamped "past-due", then just about all of your customers will have an opportunity to see this. There will be the occasional lost invoice, minor discrepancy, or price dispute that will cause most of your customers to have an invoice go past 30 days, it just happens. If your customer has been "trained" by your policy, it will never be a big shock when they see this. Also, if you follow your plan, it will help you snoop out the larger problems. No one wants to be surprised with a bankruptcy notice from one of their late customers. Those calls should be seen as "fact-finding" missions to help you determine (or foresee) what is happening with your receivable item. Following your plan makes it less personal, and more policy.

Foresight will get you so far, but a good plan will help you search out the unforeseen!