Never Lose Money!

"Rule No.1: Never lose money. Rule No.2: Never forget rule No.1." -
Warren Buffett

A lot can be said for simple advise. I had an uncle that frequently talked about money, and would give simple advice. He said, "Son your income isn't the problem, it's your outgo! If you have one less penny coming in than you have going out, you are in trouble". I love people that can simplify life and business!

Buffet's quote above while practically impossible, is at least a good mindset. I will never understand businesses that simply write off their bad debt without at least trying to recover it. It's like throwing money away with no thought. If you aren't going to at least try to recover the money, why even bother getting a credit application or setting terms?

In speaking with clients and potential clients, I "preach" a lot about having set, clear-cut, policies when it comes to credit and collections. Start with a solid credit application, set clear terms (expectations), and follow through. When your customer doesn't honor your terms and you do nothing, you may as well throw you credit and collection policy out with the invoice that you sent that customer. They are equally useless!

Credit and collections policy can be likened to disciplining your children: If all you do is issue empty threats, sooner or later they are going to learn that you do not mean what you say. You will have nothing but unruly "children" (customers or debtors) on your hand! Your credit policy becomes an empty threat. Set a policy and stick to it!

Which brings me to my ultimate point: we want to be a partof or an extension of your collection policy. Sometimes a/r personnel see us as a threat to their job. Our goal isn't to replace them but to step in and help after they have exhausted their internal efforts, as part of your policy. Once you determine that you have a debtor on your hands (somewhere between 90-120 days past-due), real outside pressure needs to be applied. Put our aggressive yet professional collectors to work for you now, before you lose that money entirely! You have to at least try to never lose money!

Neil's rule #1: At least try not to lose money; Rule #2: If you don't take action, your aren't trying; Rule # 3: If you have as much money as Buffett, retire to your own personal island and give advice about not losing money! Have a GREAT week!