Last week I talked about processes internally for taking an order to fulfillment so sales gets paid. Knowing you have dutifully addressed all the bumps and burrs impeding your order processing in the past week, I want to address the next big looming issue: Customer Payment.
Let’s go back to last week at Company X where the sales rep has received a PO. The order gets processed and pushed through the back office, the customer has received their product and/or services, and they have been invoiced.
What happens next? In an ideal world, the customer receives your invoice, smiles at the thought of the good work or product you’ve provided, and then happily cuts a check. And Company X, in turn, excitedly rewards the sales rep by paying the rep their commission due.
Did you notice a lot of smiling and a lot of processes happening? Daisy-chained together and executed without a lapse? Unfortunately, in our more accurate world, the customer hasn’t paid, for any number of reasons, and now the invoice is thirty-days old, the goods and/or services are sixty days past delivery–meaning the customer only has a vague remembrance of Company X–and you, the sales rep, haven’t seen a dime of commission.
How does this get rectified? In a sweeping generalization, many of these issues need to be dealt with up front. And I don’t mean in PO language (a topic for another post). I mean, talking to the customer about how an order gets processed, who on their side of the company touches it and ushers it through, and what obstacles loom which could stop your company from getting paid.
Herein lies the rub. This part of the typical sales cycle is either brushed aside or avoided because it is uncomfortable. It makes the rep anxious as they don’t want to be presumptive of the sale, and it makes the customer irritated, because of the aforementioned (potentially) but also this is typically not an area of expertise and they don’t have the knowledge or understanding to answer these questions.
One of the recommendations which was made to me by one of my former managers and a mentor to me, is to have the customer purchase something small from you. Whatever you can consider “small”, it is more the exercise in getting the flywheel moving so when the big purchase comes through, the axles are greased, the engine is ready at idle, and the wheels are ready to roll.
Why? Most companies have myriad documents to sign before they can engage in business. Non-Disclosure Agreements (NDA) and Master Service Agreements (MSA) are two big ones. Ask to see a copy of the company’s PO, especially if it may contain additional language. Many times customers will state their payment terms on their PO. It is quite a surprise to send in your quote which states payment is expected within 30 days of invoicing, and see this trumped by the customer’s PO which states that the customer will pay within 45 or even 60 days of invoicing.
To hammer the PO language catch example home, a former customer of mine had a clause on its PO which stated that if the customer paid within 30 days, they would take a 3% discount off the invoiced amount. We always received payment from the company on the 29th day. Another customer paid for services on a different timeline than goods–60 days versus 30 days. Each of these smells a little rank in terms of ethics, and due to the fast paced nature of business, these iniquities were allowed–with a lot of grumbling. Only when the customer was addressed about the difficulties their policies presented to us did they relent. But if we would have known about this upfront, the surprise for me and my back office would have been a lot less.
While many companies use their purchasing policy to create a mechanism for “float” it doesn’t have to be that way. If you have done the homework and asked the questions up front, you should be able to alleviate many of the speed bumps which get your company paid and you receiving commissions.
Of course, there is much more which can be done, but consider this is a musing’s first blush.
Your task for this week? Go to that customer who is always slow to pay. Ask them if there is anything you can do on your side to get them to pay on time. And if possible, help them streamline their process.
Any better ideas for Front Office vs. Back Office? I’m always interested in learning.
Thinks, Inc. is a consulting firm which specializes in Smart Sales Operations. If you’d like for us to come and assess your chaos, drop us a line at contact@thinks-inc.com
PS The Infrastructure Guy and Smart Sales Operations are Trademarks of Thinks, Inc.