Business plans are the same as a roadmap on a trip. It’s great to know where you want to end up, but what is your plan on how you get there? What is the timing?
One important part of the business plan that often gets overlooked or just plain left out is the credit and collections piece. If you do not have a business plan that includes how your cash is going to flow the rest of your plan may never happen. Every plan must have funding.
A huge thing to consider as part of your business plan for the year is reviewing your historical payment trends to predict cashflow. If you track the payment trends year over year you will see trends emerge. This ties directly back to your credit and collections program. What changes do you want or need to bring about within that area to support your business plan?
Review of your past credit granting and collection performance over the past several years and a deep dive and analysis of the date and your processes will enable to you identify the gaps, make adjustments and structure your credit/collections program to support your business plan.
Once you have identified the gaps and put refreshed processes in place your can make the progress toward your goals part of the overall business plan. Typically in many organizations, credit, collections and other back offices processes are “set it and forget it” items that are often considered necessary evils but if reviewed regular with other business plan items you can hit the objectives and help make it a successful part of your plan.
No business can survive without a consistent cashflow stream which is feed directly from how well you manage your accounts receivables.
Thea Dudley is an expert credit and collections officer, having spent 30 years in the construction field working for contractors and distributors. See her full bio here.