Collecting receivables and keeping customers isn't a hot topic for a tire dealer seminar, as was evident by the meager turnout for a presentation by dealer Richard A. Palmer on this subject at the recent ARA World Tire Conference & Exhibition in Louisville, Ky. Nevertheless, few aspects of the typical tire dealer's operations need more improvement than the granting of credit and the collection of accounts receivable.
As one dealer lamented immediately following the April 23 session, ``There's not a commercial or wholesale tire dealer in the U.S. who doesn't have a problem with receivables.''
Mr. Palmer, a professional sales trainer and a veteran of 55 years as an independent tire dealer, packed his often-witty and thought-provoking presentation with sound, practical advice to dealers on how to set up and manage a credit program. (See article page 19.)
He pointed out that because much of the typical commercial and wholesale dealer's tire sales come from small, highly leveraged businesses-many of which are slow paying-dealers can't afford to turn away potential customers simply because they lack gilt-edge credit.
Moreover, by successfully managing these credit accounts, dealers can wind up with as much as 5 percent more gross profit, Mr. Palmer contends.
By extending credit, the dealer is putting money into a customer's business. Therefore, the dealer should determine what percentage of return-or gross profit margin-he's entitled to earn on that investment.
Ironically, many dealers search constantly for ways of increasing sales and reducing expenses-while virtually overlooking their mounting credit losses.
Some willingly allow these losses to mount by permitting ``past-due'' accounts to continue buying on credit while making only partial payment of what is owed.
Others languish at the bottom of the customer's list of who gets paid. Mr. Palmer notes that suppliers ``earn'' their place in that pecking order-either by insisting on being paid on time or allowing customers to use their money elsewhere. His advice on how dealers can work their way up that list is well worth heeding.