Customer acquisition

What is Customer Acquisition?

Customer Acquisition encompasses all processes related to attracting and signing up a new client – from the initial marketing exposure to the public, identifying potential customers, making the sale, signing an agreement, registering and integrating the customer’s details, to establishing a regular and ongoing relationship with the customer.

This comprehensive process is of great significance as it forms the customer’s initial experience with the organization and has implications for all subsequent processes and activities, as well as the nature of future relations with the customer. Credit control is an integral part of the customer acquisition process, as conducting credit checks on a new customer is one of the stages of acquiring a new client.

The aim of this section is to examine the customer acquisition process both from the organization’s perspective (focusing on the considerations of the organization’s credit and collections risk manager) and from the “customer experience” standpoint.

Customer Acquisition Processes

Examining the Mutual Influence between “Customer Experience” and the Organization’s Credit Risk and Collections

In a world where “Customer Experience” is at the heart of an organization’s strategic planning, credit and collections personnel are tasked with assessing the impact of the customer acquisition and sales processes on the credit and collections framework while maintaining a positive “Customer Experience.” This does not intend to replace the traditional mechanisms of monitoring and evaluating “Customer Experience” operated by customer service and marketing professionals. However, there is a tight reciprocal relationship between the quality of sales in terms of credit and collections and “Customer Experience.” Almost every failure in the sales process regarding these aspects negatively affects the “Customer Experience,” which in turn impacts credit risks and collections.

Below are several examples of organizational failures in the customer acquisition process and an analysis of the damages they cause to “Customer Experience” and the organization:

• Inadequate Credit Assessment: Failing to properly assess a customer’s creditworthiness can lead to offering terms that increase credit risk or dissatisfaction due to overly cautious limitations.
• Inefficient Collections Practices: Aggressive or poorly managed collections can deteriorate the customer relationship, damaging the overall experience and potentially leading to loss of business and reputation.
• Misaligned Sales and Credit Policies: When sales teams prioritize closing deals without considering credit risk, it can lead to higher default rates, affecting financial stability and customer perceptions.
• Lack of Transparency: Failure to clearly communicate credit terms and collections processes can lead to misunderstandings and a breakdown in trust, negatively impacting the customer experience.
• Poor Customer Service: Inadequate customer service in handling queries or complaints related to credit or collections can further damage the relationship and discourage future business.

The following examples highlight the importance of integrating credit and collections considerations into the customer experience strategy to avoid negative impacts on customer satisfaction and the organization’s financial health.

Failure in Processing Customer Payment Methods Correctly Can Unknowingly Indebt the Customer: Mr. Daniel Mischievous contacted a telecommunications service organization and provided a direct debit form at the time of purchase. The bank account number he wrote on the form was correct, but the clerk entered a wrong number into the organization’s system when setting up the direct debit, so the direct debit was not honoured, and the bank returned it with a message “bank account does not exist.” This led to the creation of a debt in Mr. Mischievous’s account with the organization, and it was transferred to the collections system even though he believed he had paid for the service. For the unsuspecting Mr. Mischievous, this meant unnecessary discomfort due to receiving a payment demand from the organization’s collections department, and additional hassle he would go through to correct the mistake. For the organization, it meant unnecessarily entering a customer into a state of delinquent debt, unnecessary processing costs, damage to its reputation, and possibly harming long-term relations it wishes to develop with a desirable customer.

Customer Signing Incorrect Sales Forms: When a customer mistakenly signs an equipment sales form instead of a service sales form, or fills out the form incorrectly (e.g., product description, sales terms), it necessitates the customer having to sign new forms. This not only wastes the customer’s time and the organization’s resources but also creates an image of the organization as inept in managing its affairs. These issues present a risk that the customer might reconsider their purchase intention or decide against future purchases.

Failure to Request Appropriate Securities at the Time of Sale: Time Wastage and Negative Image for the Organization: Mr. Ben Kenobi purchased a digital printing press with a payment plan of 60 instalments. During the signing of the agreement, the salesperson forgot to ask him to sign a lien on the equipment in favor of the organization. The credit control department did not approve the agreement, and the salesperson was asked to return to the customer to request the signing of the lien. Understandably, this repeated approach to the customer will waste both the customer’s and the organization’s time, create a negative image of the organization, and increase the real risk of the transaction being cancelled.

Sales Representative Promises an Offer Not Supported by the Organization’s Billing Systems: Incorrect Billing of the Customer: A customer purchases a recurring service from a telecommunications company, and during the sale, the representative promises them a 50% discount for the first 5 months. However, the organization’s information systems are unable to support these terms in practice, leading to incorrect billing for the customer in the initial five months. The customer will demand a refund for the overcharged amount, and there is a risk they may want to leave the organization due to the negative experience and the effort they had to put in to reclaim their money.

This section will focus on ensuring the quality of the customer acquisition process with a dual objective: maintaining a minimum level of credit risk and collections, while also ensuring the sales process quality to achieve an optimal customer experience that allows for a proper credit and collections relationship with the customer.

Below is an overview diagram that outlines the stages of the customer acquisition process from the perspective of the credit risk and collections manager. These stages will be analyzed in detail later to identify potential failures, coping strategies, and recommended practices.Diagram 10: Acquisition process

Presenting the Offer to the Customer

In essence, the customer acquisition process begins with the initial exposure of the offer to the customer, sometimes even before any direct contact has been made with the customer. For instance, when a potential customer sees an advertisement on the side of a bus, they are exposed to an offer (“to the entire world”) from an organization selling services or products. Therefore, at the advertising planning stage, it is crucial to meticulously plan the content of the offer concerning the credit risks associated with the transaction. For example, it is important to specify in the advertisement that the purchase of a product requires payment via credit card, or that the transaction is contingent on prior approval by credit control.

Identification of the customer

The Importance of Customer Identification arises primarily from the need to extend credit. The task here is to achieve unambiguous identification of the customer – the focus is not on “who the customer is” in terms of their legal entity.

Firstly, it’s advisable to verify the customer’s details to know with whom the business is being conducted. A trivial question? Not always. In many cases, it’s discovered after the fact that it’s unclear to whom the product was sold, or the service was provided. Here are several examples:

• In the case of a sale to a private customer in a store or a small business – the customer making the purchase is not known to the seller. Even if the seller recognizes the person because they frequently visit the business, in reality, they don’t truly know who they are. The issue arises with payments by check or credit card; we cannot be sure that these payment methods indeed belong to the customer. The practical meaning of “customer identification” involves the customer presenting their identification to the seller, who will then verify the buyer’s identity and document the verification in writing.
• Even when the sale is to a business and not an individual, it’s not always clear to whom we are selling. For example, the name “Smith Movers” is listed on the accounting card. The first question is, who is behind “Smith Movers”? Is it a sole proprietorship or a corporation, and what are the implications of this distinction for the sales, credit, and collections processes? These questions will be addressed later. It’s also beneficial to know if the person regularly purchasing under the name “Smith Movers” is an authorized representative of the organization and authorized to make purchases on behalf of the organization, or if they are purchasing the product/service for themselves and obligating the organization.
• How do we identify the customer in a telephone sale?
• How do we identify a minor customer? Is this considered a reasonable risk during the transaction?
• Is it possible to detect a forged ID?
• KYC, or Know Your Customer, is a regulatory and compliance process adopted by businesses, especially within the financial sector, to verify the identity of their clients. The primary aim of KYC is to prevent identity theft, financial fraud, money laundering, and terrorist financing. This process involves collecting and verifying details about the client’s identity, understanding the nature of the client’s activities (primarily to assess the level of risk they pose), and monitoring transactions for suspicious activities. KYC procedures are critical for establishing and maintaining business relationships, ensuring customer profiles are accurately represented and keeping transactions transparent. These measures not only protect the financial system from illicit use but also safeguard the interests of customers by ensuring that their financial assets are handled securely and responsibly.

All the above issues highlight the need for accurate customer identification and proper recording of customer data in the organization’s systems.

Customer Identification in Sales

Customer identification must be performed at the initial sale. This stage is the easiest to conduct checks: the customer expects the identification request, is aware that they are not known, and thus is unlikely to be offended as might happen with a later inquiry of a longstanding customer. The required identification process varies according to the type of sale, but it’s important to remember that in the ongoing relationship with the customer, the question of identity verification usually does not arise again. Therefore, the initial check is crucial for all subsequent business activity with them, including credit extension, collection methods, and the “customer experience.”

Below are several examples of how customer identification can be tailored according to the type of sale:

Customer Identification in Direct Sales by a Sales Representative in the Presence of the Customer

When a sale is made face-to-face with the customer, the sales representative has the opportunity to visually identify the customer. The decision on the method of identification is a commercial one and depends on the level of exposure the organization has to that particular customer. In marketing networks, there are several options for making purchases with a credit card or check: some networks require the presentation of an ID for every purchase, regardless of the amount, while others require ID presentation only for purchases above a certain amount. The optimal identification involves requesting an identifying document from the customer, verification by the representative through visual inspection, and documentation of the identification by the representative (written confirmation on an appropriate form regarding the method of identification, in accordance with the organization’s requirements). Without proper documentation, the customer could always deny the transaction in the future, even if they actually made it.

Requesting immediate approval from the credit card company for the transaction, which includes the identity number and name of the purchaser, limits the risk of a stolen card, although only in cases where the theft of the card has been reported.

Beware of Identification Fraud: Be cautious of a simple fraud technique based on making small cash purchases without presenting an ID, and after a certain period, when the customer becomes “recognized” (at least by face), switching to making larger purchases on credit. At this stage of moving from cash to credit, a lot of trust is placed in the customer, and it’s forgotten that their details were not checked during the initial cash transactions. If this customer does not pay at the end of the credit period, or if the checks they provided are returned by the bank, there will be no one to turn to due to the lack of identifying information, with all the implications thereof.

Identity document forgery poses a significant challenge to accurate customer identification. The risk can be reasonably reduced by requesting additional documents, such as a check, credit card, driver’s license, or utility bill, etc. Also, it’s advisable to “visually compare” the issuance date of the document with its condition. If there’s a noticeable mismatch – the document was issued ten years ago but looks new and not worn from use – further verification is warranted.

Customer Identification in a Telephone Sale with Direct Delivery:

Identification is divided into two stages. The first stage is telephone identification of the customer and obtaining personal details over the phone without verifying them. The second stage requires the representative delivering the product or service to verify the details provided at the time of delivery by checking the customer’s ID. It’s important to include a section in the delivery slip copy where both the receiving customer and the delivering representative sign. The customer confirms receipt of the product or service, and the representative confirms that they have identified the customer and checked their ID.

Customer Identification in Third-Party Delivery (Drop Shipment) of a Telephone Sale:

This case is similar to the previous example, but the representative delivering the goods or service is not an employee of the organization itself but works for an external supplier. The organization must ensure that the agreement with the supplier performing the delivery includes a clause requiring the supplier’s representative to carry out a formal identification of the customer and document it at the time of product delivery.

Customer Identification in a Telephone Sale of Services:

In such sales, indeed, it is impossible to perform true identification of the customer. However, it is possible to verify the identity of the purchaser in a manner sufficient to enable legal proceedings against them in the future, if necessary.

When the customer pays by credit card or direct debit, it’s crucial to ensure that the customer receives billing notifications from the organization by mail, to ensure they are aware of the payments for the services purchased. Subsequently, it’s necessary to systematically document the receipt of the service from its start and throughout the entire period of use. This documentation could include details such as telephone calls made, internet browsing data collected, dates of medical services used, instances of tow service usage, dates and the nature of handling service complaints due to malfunctions, etc. The combination of informed payment and actual use over time provides reasonable evidence for the court, should the customer deny the debt accumulated, indeed, that the customer is the one who consumed the service.

The Mobile number of the customer can be verified simply by requesting the customer to enter a code that he just received by SMS. In the same way, an email address can be validated by simply sending an email to the customer and asking him to reply.

Customer Details Verification

Address Verification

 Verifying the exact address of the customer is a crucial component of transaction execution. Therefore, sometimes a pre-transaction visit to the customer’s location is necessary to assess the business and its condition before extending significant credit. A verified and precise address can save the organization considerable time and costs if collection proceedings are required in the future – in cases of sending demand letters and warnings before legal actions. While it’s possible, when necessary, to employ investigators and/or information companies to locate non-paying customers, this process involves significant financial costs and valuable time loss.

The best practice is to verify the exact address while there is an active relationship with the customer. It’s also essential to promptly address any returned mail following the shipment of invoices or letters to customers. Circumstances might include “address unknown,” “moved,” etc., so it’s crucial to determine as soon as possible if the address was incorrect or if the customer indeed moved to a new location.

Additional Details Verification

For individual customers or licensed businesses, simple actions can be taken, such as searching for details in a phone book or completing information using internet search engines. The customer verification process can be completed by comparing details to records in the company’s registry, partnerships, or the non-profit organizations registry, as well as against business information companies that compile all available information on customers. Additionally, identity details can be verified against credit rating agencies databases.

Regarding private limited companies, here is a real example (with fictitious names) illustrating one of the unique identification problems:

A business operating as a licensed business under the name “John Deresourceful Innovative Creative Solutions” had been well-known in the market for many years. After several years of fruitful collaboration with the organization supplying it with raw materials, John (the Innovator) decided to establish an asset-less company named “John the Innovative Ltd.” and make purchases through this new company under the guise of being a private business. After about two years, due to business expansion, the new company faced difficulties, failed to meet its obligations, and declared bankruptcy. Along with it, a debt of $100,000 to the organization selling it raw materials vanished, and the debt became irrecoverable. The licensed business ” John Deresourceful Innovative Creative Solutions” continued to operate uninterrupted thereafter. (Names might have been changed in this example for privacy protection).

Opening and Managing a Customer Card and Customer Identification Control

It’s crucial to understand that an initial identification of the customer is not sufficient on its own. All information collected about the customer must be meticulously documented and stored, managed via a customer card or any other suitable documentation means that fits the nature of the business interaction.

Systematic checks on the completeness of the details in customer cards must be conducted. However, the rush to complete a sale can lead to situations where the customer card is incomplete, consisting only of a hastily recorded name (sometimes only similar to the customer’s actual name) and a partial address without identifying details. Therefore, regular checks on data files must be performed to fill in missing details before confrontational situations arise or there is an urgent need to contact the customer. For this purpose, it is advisable to provide the sales representative with forms or a computerized questionnaire that dictates all the details to be filled in at the time of sale – according to the legal entity of the customer and in line with the nature and financial scope of the transaction.

Table Summarizing Customer Identification Requirements

Below is a table summarizing the various identification requirements tailored to the legal entity of the customer (a detailed discussion on the topics related to the different legal entities appears in the following section on Customer’s Legal Entity):

Customer’s legal entity	Method of Customer identification
Individual – private person or self-employed business owner	Face-to-Face Sale: At the time of purchase, collect the customer’s ID, full address, email, and telephone numbers. In certain cases (such as when the transaction amount is significant, and/or it involves the sale of a product rather than a continuous service), immediate confirmation from the credit card company can be requested to reduce the risk of a presented ID being stolen. To minimize the risk of a forged ID, the condition of the document can be verified against its issuance date, and in certain cases, an additional personal document may be required for support. Customer Identification via Telephone: Given the relatively higher risks in such a sale, it is essential to adhere to clear procedures and rules for their management. Typically, customer identification is performed in two stages, as described above: the “declaratory” stage, where the customer provides their identity details, followed by a verification stage that can occur even after the delivery of goods or services. Examples of later-stage verification include verifying the customer’s details from the ID they are required to present at the time of delivery and the customer’s signature on the delivery document. Verification of customer details and their consent to purchase a continuous service can sometime be deferred until the first billing date, whether by direct debit or credit card.
Limited Company	Request for a Copy of an Official Document of the Organization such as a Certificate from the Companies Registry. In some cases – to avoid burdening the sales process, there are indirect ways to verify the organization’s identity: a copy of a commercial document of the organization (invoice, receipt, etc.), the organization’s check, or a copy of the organization’s stamp, certification from an authorized signature in the organization approved by an accountant or lawyer. Another solution, which allows forgoing the requirement for certification from an authorized signature in the organization, involves adding a clause where the signatory confirms that if they are not the authorized signatory of the organization, then they personally commit in their name and will bear all the organization’s obligations according to the agreement. In the next step, it is possible to verify that the company indeed exists against business information databases. Most importantly, it is necessary to ensure that there is a match between the identity documents of the company provided and the details of the company receiving the product or service, and that there is a match in the licensed business numbers in all the documents provided. For instance the buyer could use two similar company names like ‘Smart buyers ltd’ and ‘Really smart buyers ltd’, two different companies.
Partnership	In the case of a partnership, the responsibility falls on all partners jointly and severally (except in the case of a limited partnership – see expansion in the section on the customer as a legal entity). Therefore, it is not sufficient to record in the customer details only the name and address of the partnership – this is very useful information at the commercial operational level, but it lacks utility in the event that any legal collection procedure needs to be initiated. The only solution here is to collect the details of all partners in the partnership (and they can be any composition of private individuals, limited liability companies, other partnerships, or other legal entities). Organizational systems must be prepared for the intake of multiple details of the partners and ensure appropriate training for the sales force and the registration of customer details.

Promises to the Customer in Sales

A promise made by the organization’s representative to the customer is equivalent to a promise made by the CEO to the customer and should be honoured (unless it is not possible). The promise can be honoured towards the customer, and only afterward, if necessary, the representative can be dealt with on a disciplinary level. The matter should be taken seriously on several levels:

• Clear instructions should be provided to sales representatives regarding what is allowed and what is not allowed to promise to the customer.
• It is essential to ensure that sales representatives fully understand the operational implications of their promises, and they are confident at the time of sale that the organization can deliver the promised product or service, and that the organization knows how to accurately bill the customer as promised.
• Once something is promised by a representative who exceeded their authority, it is crucial to ensure that the promise to the customer is accurately documented in the organization’s systems and fulfilled. Not every representative’s promise can be kept. In such cases – the order/transaction should be cancelled, and the customer should be refunded in full plus compensation, while concurrently managing disciplinary action against the sales representative.
• It is vital to ensure that correcting procedures of the database (correcting erroneous operations) do not lead to a breach of promise to the customer. Correcting refers to professional terms for self-examination and correction processes conducted in large databases, such as completing an address, correcting a name, or fixing a wrong ID number, etc. Some tuning moves are performed through billing control, which systematically identifies incorrect customer charges – for the benefit of both the customers and the organization. Poor management of billing control processes can lead to a systematic breach of purchase promises to customers.
• The sold product must be defined clearly and precisely, both in the sales agreement (contract or order form) and at the order intake stage into the operational systems, ensuring that the computerized system accurately captures the definition as stated.

Promotion and Reversal

In a large organization that supplies food products to business customers on credit, a sales representative promised a customer that they would receive 2 free products for the purchase of 7 from the organization’s products (i.e., a 22.22% discount). The customer made such a purchase, but at that time, this promotion was not supported by the organization’s automated billing system.

Two things happened subsequently: Firstly, the customer was charged the full amount without the discount, complained, and received a credit for the two promised products. The service representative who manually credited the customer’s account afterwards created a new product in the organization’s system, identical to the original product, priced at 77.78% of the original price to allow the customer to receive the promised discount. A few days later, the billing control unit found a customer record that had been given a lower price than the organization’s price list. The record made for the purpose of crediting was immediately corrected and adjusted to the billing, according to the price list. Without proper oversight, such “corrections” could have been repeated several times, damaging the proper relationship between the customer and the organization.

Contract Control

Contract control (including agreements and order forms) is a formal review of new contracts made to ensure the quality of the agreement, completeness of details, and compliance with organizational procedures, including discount and credit granting powers, to ensure proper engagement with the customer according to the expectations of both parties and organizational procedures.

It’s crucial to clarify that contract control does not refer to the legal aspects of the contract between the organization and the customer but rather its alignment with the nature of the transaction. (For an expansion of legal concepts in the world of contracts, see the following section on Contract Law). The area of contract control is often a “gray area,” sometimes neglected even in large and established companies. The reason is that contract control is sometimes perceived as an obstructive factor in the sales process. However, this area is an essential component in ensuring the quality of customer billing. Contract control is designed to detect common errors such as:

• Incorrect filling out of the order form
• Omission of customer details
• Incompleteness in the customer’s payment method documentation
• Mismatch of the product or service sold to the order form or agreement.
• Sale of products or services no longer available in the market or organization
• Exceeding the organization’s discount granting powers
• Forbidden or cancelled promotions.
• Non-compliance with the organization’s price list

Through meticulous checks, it’s even possible to indirectly detect certain types of internal fraud, such as the creation of fictitious customers by sales representatives aiming to earn unjustified commissions.

Control of Contracts with Special Engagement Characteristics

Sometimes, the customer dictates the structure of the transaction and the wording of the agreement. For example, government bodies and other large entities often prescribe the terms of engagement with them. Frequently, a request for a proposal (RFP) is issued by companies, specifying the desired contract terms and wording, along with other transaction conditions. In these cases, it’s crucial to seek legal advice to understand the precise business implications of the dictated terms and to obtain approval from the organization’s legal advisor and legal unit.

In transactions with high technical complexity (such as the sale of technological solutions), it is necessary to consult with professional experts for the accurate formulation of technical annexes and understanding of the required demands and commitments.

Credit Control for a New Customer

The process of credit control constitutes a significant part of the customer acquisition process and plays a substantial role in enhancing the quality of the sales experience for the customer. The third part of the book is dedicated to the topic of credit control – or, in broader terms, the management of the organization’s credit risks – and includes a discussion on the required checks for new customers. Here, we will only define the relationship between the various processes.

The entire customer acquisition process is directed towards an effort to smoothly integrate the customer as a new client. The managerial focus here is aimed at reducing unnecessary barriers, improving the “customer experience,” and achieving the highest possible quality of interaction. All resources of the process are directed towards easing the initiation of work with the customer. The credit control process serves as a first, perhaps primary, test that the potential buyer must pass on their way to becoming a client of the organization. The credit control process is designed to assess the financial robustness of the customer and their ability to settle their debts within the credit framework that the organization intends to provide.

The credit control unit sometimes performs control of contracts and also the profitability of the transaction, but these tasks are not part of the defined role of the credit control unit. The profitability of the transaction is the responsibility of the organization’s commercial arm (sales department), and it is preferable that the profitability control of the contracts be conducted by the unit responsible for executing the order, while implementing comprehensive and built-in quality procedures.

Processing an Order with a “Complete Kit”

In a business and manufacturing context, “Complete Kit” refers to a practice where all necessary materials and components required for a production run or a specific job are prepared and available before the commencement of work. The concept is integral to efficient manufacturing and assembly processes, ensuring that all parts needed to complete a product or fulfill an order are ready and accessible. This helps in minimizing delays, avoiding production stoppages, and ensuring a smooth workflow.

Complete Kit can also be applied in other contexts, like project management, where it would mean having all necessary resources, information, tools, and permissions in place before the start of a project. The practice is aligned with Lean methodologies and Just-In-Time (JIT) production principles, aiming to reduce waste, improve efficiency, and enhance productivity by ensuring that work is not commenced until all necessary components are at hand. This approach helps in identifying and addressing any material shortages or bottlenecks before they impact the production schedule.

When aiming to ensure an optimal and smooth purchasing experience for the customer, it’s essential to consider and remove any potential obstacles in the process and ensure that the organization’s units are prepared for all stages of the order, sale, and delivery of the product and/or service. If a “Complete Kit” is not available to one of the participants in the sales process, the customer will suffer from unnecessary waiting, the need for repeated and bothersome inquiries, and in extreme cases, it could lead to the non-delivery of the specific product ordered. For the organization, this will result in unnecessary expenses and reputational damage.

Therefore, it is crucial to ensure the presence of a “Complete Kit” at every stage of the sale:

• Pre-sale “Complete Kit“: It should be ensured that the sales representative has all the forms and tools for making the sale (such as order forms, price lists, quotation forms, etc.).
• Order “Complete Kit“: Upon completing the order, it should be ensured that the order form is fully filled out, customer details are not missing, and payment methods, including securities, are recorded in the system. This is the moment to check that the correct order documents have been signed, and that there are accompanying documents, such as lien forms or guarantees, etc.
• Pre-delivery “Complete Kit” for the service and/or product: It should be checked that the organization has everything required for the complete delivery of the service or product (primarily referring to the product itself, but also including parts, packaging, available carrier, precise address, a contact person authorized to receive the goods or service, etc.).

Delivery of the Service or Product

We reiterate in this section the process of customer acquisition from the viewpoint of the organization’s credit risk and collections manager, who is also very attentive to the “customer experience.” In this context, it’s clear that the first step an unsatisfied customer takes regarding the delivery of a service or product they purchased is to delay payment. Beyond the organization’s service charter, it’s essential to fulfill the customer’s wish so that they have no justified reason to delay payment.

The responsibility of the credit risk and collections manager does not end with maintaining an efficient collection process. The role of the credit risk and collections manager is to identify all factors affecting the customer’s payment process for the service/product – from the sales process to the completion of the delivery and collection cycle – and to ensure that the payment process is as correct as possible.

A good credit risk and collections manager is measured by the fact that most of the organization’s customers do not reach the collection process at all, and if and when customers enter into overdue debt – they are evaluated according to the speed of their exit from the collection process. When a customer becomes a debtor in arrears of the organization, the role of the credit risk and collections manager is to analyze the reasons for entering into debt, find the root problems that led to it, and beyond recovering the debt – they are tasked with ensuring that the organization acts to correct the deficiencies revealed in the sales and delivery processes.

Here are several examples of a customer entering into debt due to failures in the delivery process:

• Incorrect recording of the customer’s payment method (an error in the credit card number, bank account number, etc.)
• Defective product or one that does not match the customer’s order
• Delay in delivery, partial delivery, flawed delivery
• Non-delivery of the invoice by mail, sending the invoice to the wrong address, sending an incorrect invoice or one that does not meet the customer’s requirements
• Non-delivery of complementary documents for the sale (such as a warranty certificate).
• The customer not signing the delivery or service document.

Proving the Quality of Service or Product Delivery

Timely delivery of the product or service does not guarantee timely payment by the customer. There are cases where the customer is reluctant to pay, intending to “steal” credit or not to pay at all. In such a case, precise documentation of the product and/or service delivery is essential to enforce collection from the customer and, in extreme cases, to enable a legal claim in due time. The customer’s failure to sign a delivery certificate, service document, or any other document – describing the provided product/service and the delivery date, which also includes the customer’s confirmation of receiving a product/service that matches their order – could lead to non-repayment on time or at all.

Direct Delivery by the Supplier (Drop Shipment)

In some cases, the product is delivered directly to the customer by a supplier hired by the organization. The goal is to avoid the need to manage inventory items and to save on storage and shipping expenses. Sometimes, this indeed is an efficient and correct working method, but it also implies a disconnect between the customer and the organization. Beyond the commercial aspect of the matter, which relates to customer satisfaction with the quality of delivery (timing and condition of the product/service), the organization depends on a third party to handle the paperwork related to delivery properly. Sometimes, the process is cumbersome or flawed, and the organization does not receive the essential delivery documents in full and on time to close the sales process, hence the credit risk and collections manager of the organization must scrutinize the process and express their opinion on the future collection capability according to the third-party delivery conditions.

Additionally, there is a problem with handling delivery deficiencies made by a third party – there’s difficulty in “keeping a finger on the pulse” on this issue, addressing deficiencies quickly, and minimizing potential damages to the organization.

Welcome Kit for New Members

One of the most effective and friendly ways to ensure that a new customer’s details are correctly recorded in the organization’s system is by sending a Welcome Kit. This kit allows the customer to personally verify that the sales process has been completed to their satisfaction and ultimately confirm it. The Welcome Kit can include:

• A description of the new customer’s details as recorded in the organization’s systems
• A summary of the sales terms (or promotion), according to the organization’s documentation
• Confirmation of payment method received (here, the information must be partial, such as the last four digits of the credit card or bank account)
• Instructions for using or activating the product
• Promotional material – such as a product catalog and price list – that will allow expanding the customer’s “sales basket” in the future
• It’s advisable to include a small gift in the kit (as compensation for the trouble of verifying the details and as a welcome gesture to “the organization’s customer family”) or a voucher for receiving a prize without/in a draw upon receiving confirmation from the customer that they have checked the details recorded and found them correct/incorrect.

Instead of a Welcome Kit, it’s possible to conduct a verification and confirmation call with the new customer to check all details recorded in the organization’s system. Beyond the personal and caring feeling such a call conveys, it will be an excellent opportunity to assess the customer’s satisfaction level from the sales process. It’s advisable to record the call, allowing the organization to elevate both positive and negative impressions to improve the “customer experience.”