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Hate Making Collection Calls? How to Do Them Right

Since calling late-payers can be painful, make your effort to collect what you’re owed as efficient and effective as possible. Here’s how.

Michelle Dunn

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Payments

Let’s face it: No one likes making collection calls. So it makes sense to try to get the most out of each call.

Making collection calls is a skill you can develop. You have to be able to anticipate what the customer is going to say and be ready for anything, and you must remain in control of the call. For your collection call to be a success, it must always result in agreement as to what is to be done.

Related: Smart Payment Policies

From a business owner’s standpoint, a collection call is “just one more thing” they have to do on a long list of things to do. Here are a few tips that will help you get your collection calls done quickly and efficiently.

  • Schedule a regular time or day each week to make collection calls
  • Have all account information on hand
  • Leave messages, but do not reveal that the call is about an unpaid bill
  • Get the debtor to acknowledge the debt by asking if there was a question about the charge
  • Offer to take a credit card over the phone for payment
  • Ask when they will pay — and wait for an answer
  • Let them know you are documenting whatever commitment they make about a payment on their account.

You must ask questions that require specific answers when you are making collection calls. Speak with precision and make the transition from questions to a payment arrangement. Each question should be clear and to the point, with silence after each. An example:

Debtor: I can’t pay; I don’t have any money.
Collector: Are you working?
Debtor: Yes, but I just started a job and don’t get paid for two weeks.
Collector: What day will you get paid?
Debtor: Friday.
Collector: On Saturday, you can mail me a proof of payment for R250.

This scenario can go in several directions, depending on how the debtor responds. You have to be positive, confident and compel the debtor to agree to make a payment. Once you have come to an agreement, send a confirmation letter with a payment envelope. Then call on Friday to remind them to mail the payment the next day.

Keep in mind that the people from whom you are trying to get money will use a lot of excuses to avoid paying. I have had debtors tell me they did not receive the confirmation letter with the payment envelope and don’t have any envelopes themselves, so they can’t make the payment.

You have to be ready for anything; you will never stop hearing new and different excuses. I told this particular customer that I could send her another payment envelope but I needed a new address so I could make sure she would receive it, and she could make two payments when she received it. The other option was taking a payment over the phone or Western Union that day.

Related: Payment By Pebble

It is essential to convey confidence when speaking to customers about a past-due bill or discrepancy. Does your body or phone language say you’re trustworthy, confident, and competent – or just the opposite? Here are four tips for a confident phone voice that will help you to collect more money:

  1. Your Greeting: People often make a judgment about you in the first two seconds of an interaction. It’s not what you say in that short time that matters most, but often how you present yourself. A dull, monotone will leave your listener with little confidence in you or your message. Smile when you speak on the phone; it will be noticeable in your voice.
  2. Your Voice: Sit up straight in your chair and picture the customer across the desk from you. Pay attention to how different your body language is. Do not slump in your chair, and notice how people react to you differently.
  3. Eye Contact: Since there is no eye contact when you’re on the phone, try to remain focused on the call and not on anything else going on around you. Think about how it feels when you are talking to someone who keeps looking around behind you to see what else is going on. Focus on your caller and be aware and alert.
  4. Confidence: Former California Governor Arnold Schwarzenegger is an example of someone who has an air of confidence about him. You won’t see him wringing his hands, or rubbing them repeatedly through his hair, shuffling from foot to foot or jiggling the change in his pocket. He comes across as someone who won’t cower or retreat, just as a bill collector should act.

Be ready for some emotional reactions when you make calls to past-due customers. They might be angry, embarrassed, sad, or frustrated. They might cry, swear, and yell. But keep in mind that the purpose of your call is to get the bill paid.

You can listen, let them know that you understand, and – based on their situation – offer a solution such as a payment plan or another option that will benefit both of you.

Related: Should customers sign a payment terms contract?

This article was originally posted here on Entrepreneur.com.

Michelle Dunn, author of an award winning book, columnist, one of the Top 5 Women in Collections in 2007 & 2008, one of the Top 50 Most Influential Collection Professionals of 2007 shares her hard-won expertise on debt collection with the titles in her "Collecting Money Series."

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How to Guides

The Steps Involved In Joining An Investment Holding Company For High Growth

There are many growth capital avenues available for established entrepreneurs. One of those is joining an investment holding company. Is this the right move for your business?

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Let’s say you’re a high-growth, high-impact business that’s reached a ceiling; a point at which you need to seek investment partners as a growth tool. Many mature businesses approach an intersection at which it becomes clear that they need to unlock capital, identify mentors, or collaborate beneficially with other subsidiaries.

If your goal is to join an investment holding company, what are the steps involved and what can you expect from the process?

Sustainability and scalability are the key

To begin with, it’s important to clarify the difference between a private equity (PE) investor and an investment holding company. PE investors need to go into an investment knowing what their exit strategy will be, while groups choose to invest in businesses that have shown themselves to be sustainable and scalable. As long as they continue along that road, the group is more likely to hold onto them. You are also a member of that group, and subject to its board.

In the case of MICROmega, we seek first to understand the business. If we are able to do that, we look for sustainability and scalability, and if these characteristics are clearly evident, we go on to pursue an investment opportunity. This is typical of investment holding companies.

Related: Dragon’s Den Polo Leteka Gives Her Top Tips To Attract Growth Capital

Once we become the investment holding company, we try to remove as many of the subsidiary’s distractions as we can: Alleviating administrative and financing burdens so that business owners are free to focus on growing the business. In our experience, growing businesses become more and more administratively intensive, which can bog entrepreneurs down.

This is ultimately a partnership, so everyone should benefit from the association. At the same time, you need to be sure that the investment holding company shares your values — this is a long-term relationship, and you need to know that you’ll be happy down the line.

What would-be subsidiaries need to do

business-subsidiary

1Define exactly what you want

While there are some basic strategic values that any partner should be able to bring to the table — namely, access to capital, industry-specific networks, and economies of scale — it’s wise for an investor-seeking business to have a predetermined idea of the specifics that they require from a potential strategic partner.

2Research, and research again

Any long-term investment relationship should begin with extensive research on the investment partner universe. There are many potential investment partners out there, but each has specific investment mandates, sector or industry preferences, and value preferences. Ensure that you can identify and understand these.

3Be clear on your own risk profile

The quantum of funding required will impact the choice of funding partner. When you understand your risk profile relative to the type of returns on offer, you’ll be able to determine, and strive to seek out the most appropriate funding source.

Related: Common Mistakes SMEs Make When Looking At Growth Opportunities

4Unpack your plan for the capital

Businesses seeking to be acquired should be clear on what they will do with the capital to be contributed by the investment partner, and how growth will be achieved.

5Ask the investor the right questions

I’m a firm believer in would-be subsidiaries ensuring that they adequately evaluate potential investors. The starting point is to ensure that the interests of both parties are aligned.

Thereafter, further questions should cover:

  • Investors’ detailed track records
  • Their investment mandates
  • The returns that they target
  • Their typical risk profiles
  • The origins or sources of their funding.

6Ensure a sense of shared spirit

It is essential that the investor and the organisation’s priorities and approaches are aligned at the outset; that they are on the same page. Many things can go wrong between entrepreneurs and financial partners, and the worst outcome is that the investor crushes the entrepreneur’s pioneering spirit.

Related: What Type Of Growth Funding Do You Really Need?

In such a scenario, no one wins. This is why I believe that both parties should be happy, with a sincere sense that they have entered into a partnership that will create value on both sides.

Regardless of who your investment holding company is, you should expect it to provide access to capital and support throughout the business; provide mentorship and ideas around innovation; and help you to create an environment in which you are able to focus on innovating, and not on administration management.


Checklist

  • Do you know what you’d like from an investment partner?
  • Have you thoroughly researched potential partners in your sector?
  • Have you determined your risk profile versus potential returns?
  • Do you have a plan on what you intend to do with any capital raised?
  • Do you have a clear list of questions to ask any potential investors?
  • Have you evaluated whether there is value-alignment?

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10 Ways You Should Invest Your Company’s First Profits

When the company finally starts making money, invest it so that it keeps making money.

John Boitnott

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You may have heard of the tradition of saving your first dollar from your first sale. Mom and pop stores have them framed near cash registers or tucked lovingly into office drawers. It serves as a symbol for the toil and joy of building a business.

So you’ve earned your first rand(s), and now you’re wondering what to do with them. Here are some of the best ways to invest and reinvest your company’s first profits.

1Business improvement

Most startups spend their initial profits in reinvesting, and your company should be no exception. The key to reinvesting is to have a sound strategy, not to necessarily devote a certain percentage of your profits. Your reinvestment efforts should be in line with your current strategic plan.

Most business owners choose to reinvest their profits in business improvements – for example, infrastructure, equipment, streamlining business processes, or finding ways to improve the customer experience. These are all valuable strategies because they can increase your profits in the long run, allowing you to expand business operations.

Related: Successful Entrepreneurs Limit The Downside To Maximise Profits In The Future

2Marketing

Digital marketing is always a smart investment of profit, when it’s done well. Many of the startups I’ve seen over the years wait several months before they do any real investment into marketing. Sometimes it’s because they just don’t know where to start.

You can’t lose by investing in performance metrics. Always keep track of your campaigns and adjust them accordingly. If you have little experience with marketing, consider outsourcing to an agency.

3Invest in your team

Building a better workforce will streamline your business, improve productivity, and create the kind of company culture that will attract hard workers. Reinvest profits in human resources initiatives such as training and continuing education.

As your company grows, you can expand to include benefits packages and other discounts. Investing in your employees early on will help you reduce turnover.

Keep in mind, hiring a new employee costs a lot of money – about six to nine months of a lost employee’s salary, on average.

Related: How Smart Managers Drive Profits

4Invest in yourself

Find ways that you can improve yourself in subject matter expertise. For example, many startups are spearheaded by people with a good eye for innovation but who don’t necessarily know how to manage people.

This is actually one of the most common criticisms founders face. Classes on management or basic business operations can be invaluable for people who don’t come from a formal business background.

5Hire help

To that end, entrepreneurs are also guilty of trying to wear all of the company hats. Recognise when you need help, and ask for it. New hires can provide the technical skills and know-how to keep your operations running smoothly. This is one of the best investments you can make in the long run.

6Consider coaching

If you’re unsure of how you should create your strategic plan, consider using some of your profits to hire a career coach. These professionals can provide guidance on executive leadership, creating a business strategy, talking to investors, and handling conflict between employees, among other things.

Related: What the Power of 10% Rule Can Do For Your Profits

7Outsource your least favourite tasks

We all have a dreaded task that sucks some of the joy out of running a business. For some, it’s balancing the books or running payroll. For others, it’s assessing and tracking the efficacy of marketing campaigns or content creation for the company blog. Fortunately, you can outsource most of these to third parties. Find someone qualified and hand over the task.

8Improve your SEO

First, if you launched a company without a website, create one. Second, spend some time, money, and energy getting that website to the top of Google’s Search Engine Result Pages (SERPs). For the uninitiated, Search Engine Optimisation is a tricky beast, but you’ll get the hang of it (or find someone qualified and outsource it).

The small business administration offers a useful primer on the topic, as well as other resources. If you’re looking for a way to see a significant return on investment in a relatively short time, this is one way to do it.

9Create a cash buffer

While reinvesting in your business is great (and necessary), make sure you’re sitting on enough cash to handle problems that may arise. While your business insurance policies will cover the disasters and catastrophes, it’s always advisable to have liquidity available for when you really need it.

10Don’t diversify too early

Many budding entrepreneurs make the mistake of diversifying their investments too early in the process. Stocks and bonds are important, but so is building your empire. To invest your first profits, start with what you know. No one knows your business like you do, so it seems like the natural place to start.

For now, enjoy your first profits by putting them back into the fruits of your labor. Take care of your employees and customers, and your profits have a better chance of growing organically. With time and proper investment, you’ll soon be poised to open another location or expand to a new market. Reinvestment will always be a smart business move.

This article was originally posted here on Entrepreneur.com.

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Do You Know What You’re Worth?

How to determine your hourly rate.

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We’ve all been there. Maybe you’re there right now. You charge out your work at a certain hourly rate, but you’re suspicious that you’re either a) being ripped off or b) hitting above your weight.

It’s more than likely that the only way you judge if your pricing model is accurate is against what you think your competitors are charging.

When a prospective client walks in with a quote from across the street to see if you can do the same – for less – you carefully examine that quote for clues as to what you should be charging.

More than that, there is often a real fear near the end of the month that you might not cover your running costs.

You hope and pray for a big job to come in soon so that you can charge a big deposit and at least pay salaries.

I’m here to bring you good news today; there is a better way.

Determining Your Hourly Rate

Knowing what your true hourly rate should be in order to cover your overheads and expenses will give you a clear path to business control, growth and potential profit.

So how do we do it? Initially it takes a bit of work, but after it is calculated it is relatively low maintenance and will ensure you run your business smarter.

Related: How Can You Compete Without Discounting Your Price?

Start With Your Cost Centres

cost-business-centres-separate

Aside from making up the basic framework and substance of a business, and being the basis for creating a profit, cost centres are what we use to determine hourly rate.

A cost centre is used to break the business into measurable portions in order to determine if that portion is profitable. A cost centre could be your design team, your delivery fleet, or your expensive machine that fills one third of your factory floor.

The reason we break up a business into cost centres is to better identify and isolate variables to determine how efficient they are. This is less overwhelming than trying to improve efficiency as a blanket rule across the entire business.

If you have an ERP or BOS system in your business that handles your business admin and quoting, then make sure you understand how to set up your overhead and production cost centres in that system.

We like QuickEasy BOS for this as it has a handy cost centre Wizard that allows business owners to have full control and clarity into this step. Alternatively, if you do not yet have ERP software, this will be a more manual process for you.

Every business has two types of cost centres:

A business has direct and indirect costs, and these require two different types of cost centres.

Production cost centres

These are the direct costs. These contain expenses such as equipment or computer costs, monthly maintenance and production salaries – costs directly associated with the production of a product or service that you sell.

  1. Machine costs: The total replacement value of a machine or computer or equipment, broken down to a per-month value.
  2. Maintenance costs: Does your equipment need monthly maintenance? This must be included in your calculation – perhaps this is your IT maintenance contract or your vehicle’s service fees. Provision must also be made for breakdowns and repair.
  3. Labour costs: Only salaries directly associated with production are to be added here. The machine operator and his assistant, the driver, the designer using his Mac book – their weekly or monthly salaries will be included in this cost centre’s cost.

Related: What Is The Real Cost Of Your Time?

Overhead cost centres

These are the indirect costs. These contain expenses that are not necessarily directly recovered from the sale of your product or service, but are necessary to support the business.

These are expenses such as electricity, rent and admin salaries. Essentially the ‘expenses’ from the Income Statement, less the production salaries.

There are typically many production cost centres in a business, and only one overhead cost centre.

Overhead costing models

When considering how to cover overhead costs, there are two models that can be implemented.

The first approach splits the overhead costs across the business’s cost centres, and includes them in the hourly rate. This ensures that every estimate and quote covers a portion of your Overhead expenses. Each production cost centre accounts for a percentage of the overhead expenses – the larger the production cost centre, the greater portion of the monthly overheads is allocated to it.

Alternatively, overheads can be excluded in the hourly rate and added as an adjustment or markup in your quote.

Productivity

Determining the hourly rate depends on the productivity within a cost centre.

Knowing how many productive hours are available for work to go through that cost centre will help you determine what each hour should cost.

  1. Weeks per year: With 52 weeks in a year, not every week is productive for your staff members. There are two weeks of public holidays every year, and three weeks of annual leave. That leaves 47 productive weeks in a year.
  2. Hours per week: With 40 hours typically available per week, in reality most people are only productive 80% of the time. That leaves 32 productive hours per week.

To calculate the productive hours per month (which you will use to calculate hourly rate) take weeks per year, multiplied by hours per week, divided by 12. Or:

Hours per month = (weeks per year x hours per week) / 12

Note: Be attentive when it comes to your productivity calculation; not all cost centres are as productive as the next. If after a while you notice a cost centre only sees 20 hours of work a week for example, then the calculation will reflect a higher hourly rate.

Initially you may have to do some thumbsucking to start the ball rolling; feel free to use these values (above) for your baseline productive hours as a start. Alternatively, your ERP or BOS system should show you monthly cost centre recovery so that you can adjust productivity accordingly. Once again, we like QuickEasy BOS for that.

Related: How Salary Transparency Empowers Employees – And When Not To Use It

Calculating Hourly Rate

We’re almost there – you’re about to find out what you should charge per hour for each of your cost centres.

To determine your hourly rate, total your monthly costs (equipment, maintenance, labour) and divide this by the productive hours of the cost centre, or:

Hourly rate = monthly cost / hours per month

 Apply this to each of your cost centres. There you have it! Rinse and repeat. Now that you know what hourly rate is required, you can recover the costs of operating each cost centre.

Once you have implemented this don’t just leave it there – salaries increase, equipment is replaced, electricity goes up – so be sure to review your cost centres from time to time to make sure your expenses are up to date and reflecting accurate costs.

After that, it is up to the business owner to determine if the cost centre should charge a flat hourly rate, or what markup or adjustments should be made to the calculated hourly rate in order to make a reasonable profit.

The guesswork is removed, anxiety is replaced with clarity and the business owner can make price-decisions based on fact.

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