Collection letters and correspondence

 The first collection letter will be friendly yet firm, advising or informing the debtor that according to the records payment is overdue.  The second letter is firm, informing the debtor that payment is overdue and that he/she has not responded to previous requests for payment.  Any letter demands payment of a certain amount to be received before a certain date.  The final letter is a final demand for payment and is sent by pre-paid registered mail with a warning of legal action to follow if payment is not made as demanded.  It may have a warning that interest will be charged and the rate it will be charged.

Creativity in a company

Creativity is the soul of entrepreneurship and is required in spotting the patterns and trends that define an opportunity.  It subsequently becomes imperative in developing innovative business concepts.  The corporate entrepreneur has to be highly creative in getting a sponsor, building and using a network, obtaining management buy-in for the concept forming a team, gathering resources and overcoming the many obstacles that will be thrown into his/her path.

Much of the work on creativity tends to focus on the ability to relate and connect and to put things together in a novel way.  In a business context, creativity is not mere originality.  It is a pragmatic dimension in that creative approaches or solutions must also be useful and actionable in the context of the company and its competition.

There are three components of successful creativity in organizations: expertise, motivation and creative thinking skills.  Expertise is defined as what you know and can do.  Motivation can be primarily a passion or interest or the desire to achieve company rewards and awards.  The individual is solely driven by the challenge and joy of accomplishment.  Creative thinking can be explained as the ways individuals approach problems differently, seeking insights from other fields of endeavour, challenging assumptions etc

Employees should, however, be provided the freedom and access to resources to practice these components.

The importance of cash flow to business

A cash flow forecast is one of the key aspects of the credit function of a business when corporate marketing and collection forecasts are drawn up.  This will aid the finance department to finance the debtor’s ledger.  If cash flow falls short of forecasts, additional finance may have to be reduced because of a shortage of working capital.  This naturally impacts negatively on the profitability of a business and could lead to the restriction of business activities with the possibility of a reduction in staff.

Reasons for charging interest on overdue accounts

Profit margins will continually be affected by the rising operating costs of a business and all industries and most businesses, credit providers and consumers will be affected.  This allows charging of interest on overdue accounts to become more popular.

Executive management use variances between budgets and actual performances to monitor the  progress of a business towards obtaining its corporate profit objectives.

Hidden costs are also known to exist which are detrimental to the profits of the business, yet they are ignored for fear of competitor reaction and customer relations.  The loss of income on overdue accounts is one of those hidden costs.

Loss of income as a result of slow paying customers could be responsible for the biggest loss of profits.

Where should quality checks take place?

The key tasks for operations managers is to identify the critical points at which the service or process need to be checked to ensure that it will conform to specifications.  These checks may be carried out at the start of the process, during the process and after the process.

At the start of the process the incoming transformed resources could be inspected to ensure that they are to the correct specification.

During the process checks may take place at any stage but there are a number of particularly critical points in the process where inspection might be important:

• Before a particularly costly part of the process
• Before a series of processes during which checking might be difficult
• Immediately after part of the process with a high defective point
• Before a part of a process that might conceal previous defects or problems
• Before a point is reached, after which rectification and recovery might be impossible
• Before potential damage or distress might be caused
• Before a change in functional responsibility

Checks will take place after the process as well to ensure that the service conforms to its specification or that customers are satisfied with service they have received.

Factors that influence successful project management

All projects are prone to different problems and fail for different reasons.  In order to minimize the chances of a project failing to meet its objectives the following factors become particularly important:

• Clearly defined goals: the general project philosophy or general mission of the project and a commitment to these goals on the part of the project team members.
• Competent project manager:  a skilled project manager who has the necessary interpersonal, technical and administrative skills.
• Top-management support: enabling communication to all concerned parties
• Competent project team leaders: the selection of and training of project team members, who between them have the skills necessary to support the project technically.
• Sufficient resource allocation: money, personnel, logistics etc.  which are available for the project in the required quantity.
• Adequate communications channels:  sufficient information is available on project objectives, status, changes, organizational conditions and client’s needs
• Control mechanisms: these monitor actual events and recognize deviations from the plan
• Feedback capabilities:  all parties should be able to review the project’s status and make suggestions and corrections through formal feedback channels or review meetings
• Responsiveness to clients: all potential users of the project are concerned which are kept up to date on the project’s status.
• Trouble-shooting mechanisms: a set of procedures to tackle problems when they arise, can trace them back to their root cause and resolve them.
• Project staff continuity: the continued involvement of key personnel over the project life cycle.