Managing your Accounts Receivable – It starts with the Quote

In my last post I laid out a high level framework detailing how you can approach the concept of managing your accounts receivable. The process is extremely complex and management teams must pay attention to several different points to ensure the process runs smoothly.

If you are attempting to optimize your A/R, first and foremost, you should begin with the price quote. During this process, you will first discuss the specifics integral to acquiring the prospect as a customer and retrieving payment.

Here are the items to which you should pay close attention:
– Make sure your quotes are restricted to items currently located on the product list (the product list should only include items currently available). Selling against items scheduled for future release and not solidified in terms of pricing and delivery could complicate collections (discrepancies may arise in terms of what the cost and process for delivery of goods/services should entail).

– Make sure your quote clearly displays your contact information, such as company name, address, telephone, email and website. The customer should have all the necessary contact information to reach you.

– Ensure you have the correct contact information for your customer / prospect (this is important so that bills/invoices in the future arrive at the correct place).

– Clearly state at the top of the page whether the document is a “Quote” or “Estimate”.

– Be extremely clear on the payment terms: both method of payment and timeframe. You should list standard terms for all deals, and exceptions should be signed off by the CFO or controller.

– Be very clear on the description of the goods/services you are providing and the costs (quantity / scope of work / amount for individual items). Use specific terms as much as possible to eliminate customer confusion and disputes.

– Validity for quote: Include a timeframe for how long you expect to honor the quote.

– Authorized vendor and customer signatures: Set up controls around who possesses the decision making authority to authorize, sign and validate your customer contact.

– Once the quote is generated, it should flow into your accounting system. It should also be reviewed by accounting prior to its release to ensure the terms are clearly stated and the correct contact information is evident.

– Consider utilizing a quoting engine in your salesforce implementation to flow automatically into your accounting system. This will give you control on what your reps can choose for items and pricing (though you may want to allow some flexibility with discounting).

The above items are very important while you are looking at the quotation process through the lens of optimizing your A/R. At the end of the day, if you don’t possess this level of control over how quotes are compiled and delivered, it’s only a matter of time before you run into problems and disputes.

 -KKF