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E-Folder - Credit Management: Design a System and Work the System
How well does your company do at collecting past due accounts? The answer will vary widely depending on your discipline, your tenacity and perhaps even your region of the country.
Fortunately, few regions of the country use credit as a tool for any other purpose than customer conv
Fortunately, few regions of the country use credit as a tool for any other purpose than customer conv
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
enience. However, some regions do use credit as a marketing tool. And in others, sometimes dozens of years ago, companies began to allow customers to use them like most professional customers use a bank. And a long history of practices like these are always difficult to eliminate.
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
Among the ways credit management is generally measured:
• Average accounts receivable collection days.
• Bad debt expense as a percentage of sales.
• Recoveries as a percentage of outstanding balances.
• Turn around time for processing credit applications.
• Service charges c
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
ollected.
We have good statistics on average collection days, which in the most ideal circumstances run from the high 30s to mid 40s. And many well managed firms are able to hold bad debt expense to under ?% of charge sales.
What is your system in your company? Consistency in fol
We have good statistics on average collection days, which in the most ideal circumstances run from the high 30s to mid 40s. And many well managed firms are able to hold bad debt expense to under ?% of charge sales.
What is your system in your company? Consistency in fol
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
lowing a system is essential to achieving optimal results.
One owner I met recently, has reduced his collection days to the low 30-day range by mailing an invoice to his customers immediately following each delivery. This is somewhat of an unusual system, but it is innovative and
One owner I met recently, has reduced his collection days to the low 30-day range by mailing an invoice to his customers immediately following each delivery. This is somewhat of an unusual system, but it is innovative and
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
it works for him. He says that he is surprised at how many customers pay their invoices upon receipt.
The following is one system that works for many dealers:
Step One: Assign accountability to one person in your business for collections and establish measurable standards for thi
The following is one system that works for many dealers:
Step One: Assign accountability to one person in your business for collections and establish measurable standards for thi
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
s individual to achieve.
Step Two: The credit manager should place a phone call to customers whose checks have not been received three to four days following the due date and find out when they intend to pay. Meticulous notes should be taken to remind the credit manager what was p
Step Two: The credit manager should place a phone call to customers whose checks have not been received three to four days following the due date and find out when they intend to pay. Meticulous notes should be taken to remind the credit manager what was p
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
romised so these notes can be referred to if follow up phone calls are necessary.
Step Three: Using customer contact software, a calendar box or some other type of follow up system, call the customers who have not done what they promised to do. Past-due customers must know that th
Step Three: Using customer contact software, a calendar box or some other type of follow up system, call the customers who have not done what they promised to do. Past-due customers must know that th
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
ey cannot get away with merely stalling or holding up payment, so consistent follow up is critical.
Step Four: Visit customers who don’t pay and who don’t live up to their commitments. Find out what is preventing the past-due customer from paying. If the payment is in dispute, fin
Step Four: Visit customers who don’t pay and who don’t live up to their commitments. Find out what is preventing the past-due customer from paying. If the payment is in dispute, fin
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
d out what sort of concession the customer wants before he is willing to pay up. In collections like in life, it’s the squeaking wheel that often gets the grease. Past-due customers must realize that collecting your accounts receivable is a top priority for you.
Step Five: If you
Step Five: If you
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
ave not already cut accounts off who have not given you a satisfactory response, do so immediately and turn the account over to a third party for collection. Do not take this step, however, without advising the customer that this is your next step. Also make sure you understand and
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
agree with the collections tactics used by the collections firm you choose. Even though it’s a third party, your company will be identified with the outside firm’s tactics.
Step Six: Insist on each past due customer paying service charges. One owner told me recently that he tells
Step Six: Insist on each past due customer paying service charges. One owner told me recently that he tells
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
his customers this: "I have to pay for capital, so if you don't pay me on time, I have to borrow more money and pay more interest. Unless you can show me someplace I can get capital for free, you're going to have to pay me a service charge when you don't pay your account on time."
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
The owner or GM should follow up with the credit manager on a pre-determined basis to make sure that he or she is following each step in the collections process.
The key to an effective collections policy is to avoid being guilty of wishful thinking. No matter how much you hate
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
collecting, someone in your organization must meticulously follow up according the plan you have designed.
In recent years, many companies are turning over their credit function to an outside organization. One such firm is Charlotte-based Blue Tarp Financial. (www.bluetarp.com).
In recent years, many companies are turning over their credit function to an outside organization. One such firm is Charlotte-based Blue Tarp Financial. (www.bluetarp.com).
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
Why would a company outsource credit? The owners I interviewed in preparation for this article shared with me some of their reasons:
• We’re not a bank, yet many of our customers treat us like a bank. We’ve never been really good at credit, so we decided to turn it over to an orga
• We’re not a bank, yet many of our customers treat us like a bank. We’ve never been really good at credit, so we decided to turn it over to an orga
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
nization that was an expert at it. We’ve not had a bad debt since.
• We outsourced credit to improve our cash flow. Blue Tarp offers us the option to pay us either every 30 days or for a few additional basis points, every 15 days. This enables us to take all of our vendor cash dis
• We outsourced credit to improve our cash flow. Blue Tarp offers us the option to pay us either every 30 days or for a few additional basis points, every 15 days. This enables us to take all of our vendor cash dis
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
counts and frees up cash for other capital expenditures.
• Our credit manager was freed up to perform functions she never had time to do before we outsourced credit. While she did her best, she was not a credit professional. Now I feel as if our credit is for the first time being
• Our credit manager was freed up to perform functions she never had time to do before we outsourced credit. While she did her best, she was not a credit professional. Now I feel as if our credit is for the first time being
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
handled by professionals.
• I [outsourced credit] for selfish reasons. I operate in a relatively small town and I have a difficult time turning down a customer I grew up with. As a result, I have suffered some significant credit loses from time to time. Now, I just tell my custome
• I [outsourced credit] for selfish reasons. I operate in a relatively small town and I have a difficult time turning down a customer I grew up with. As a result, I have suffered some significant credit loses from time to time. Now, I just tell my custome
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
rs that it’s not my decision.
Regardless of whether you handle credit in-house or outsource it, someone must take credit seriously and handle it professionally. Owners and managers who take credit too casually almost always end up paying a big price for their inattention to detail
Regardless of whether you handle credit in-house or outsource it, someone must take credit seriously and handle it professionally. Owners and managers who take credit too casually almost always end up paying a big price for their inattention to detail
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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