Making Salespeople Collect
When Steven Wilson started his Bettendorf, Iowa, company, Mid-States Technical Staffing Services, six years ago, he made an unusual decision: to require his six salespeople to assume primary responsibility for collecting funds due from their own clients. The results have been impressive. With revenues now around $4 million, Mid-States -- which leases engineer services to corporate customers -- averages a 20-day collection cycle. And the company has failed to collect on only two invoices, both in situations in which clients declared bankruptcy.
On a weekly basis, the company sends invoices to clients for all services performed during the past week. "The first invoice goes to the salesperson as well as the client. Then we encourage the salesperson to track that invoice, so that he learns exactly where it will flow within the client's organization -- which includes details like who must sign off on it; what backup information will be required; and how soon, during the normal course of action, we can expect to get paid," explains Wilson.
The goal is to identify potential glitches early. "Our terms are net 10. If we're slated by a client's accounting department to be paid at, say, 25 days, our salesperson has the option," Wilson says, "of going to the client and imposing a rate increase if the company can't pay us as quickly as we demand. Usually, the client responds by putting us on an accelerated payment schedule."
Every week each member of the sales force gets an individualized report from the accounting department, which updates the payment status of all the rep's invoices, by client. "Every new salesperson we hire is trained to pick up early warning signs from those weekly reports," says Wilson. Those might include a sudden stretch-out in a customer's typical payment procedures, or an invoice that appears lost in cases in which earlier and later bills have been paid.
At any sign of trouble, the salesperson gets in touch with the contact person within the client corporation. On those rare occasions when invoices become six weeks overdue, Mid-States' salespeople personally notify their contacts that services will be halted by the following Monday.
"The sales force told me early on that they didn't want our accounting department approaching their contacts in a potentially negative manner," says Wilson. "This way sales reps can do everything possible to preserve good relations with their clients." And salespeople don't seem to jeopardize rapport with customers by chasing after invoices: "People who contract for our services value them, so they don't blame us for wanting our money," says Wilson. "They usually blame their own accounting people for failing to pay on time."
Another reason salespeople like the system: Wilson calculates sales commissions, in part, on the speed at which an individual's invoices get paid. "This helps convey an important lesson to our salespeople," he says. "What makes a business successful is profits, which include speedy collections, and not just sales." -- Jill Andresky Fraser