Favorite Management Technique: Collections
“You can’t grow a company if you don’t have money,” says Todd Werstler of Tower Industries in Massillon, OH. “You gotta, gotta, gotta have cash. You can never have enough cash.”
Entering its 20th year in business, Tower Industries specializes in the manufacture of solid surface showers for the commercial market. Additionally, the company manufactures, fabricates and installs premium solid surfacing, natural stone and quartz surfacing. In 2014, Tower Industries projects double digit sales in the millions of dollars, which is an increase of 33% over 2013.
100% Up Front
“In 2014, we will probably do $4 million in direct countertop sales alone to the general public,” Werstler says. “Every one of those will be paid for in full before we ever show up to the house.”
Did you catch that? 100% payment, in advance, on every residential project. No exceptions. How is that possible? “We are very well known in the market and we have a very good reputation for serving the client,” he explains.
“It’s not that we are perfect – we are far from it – but anybody that deals with us knows if there is an issue we will absolutely, positively address it on a timely basis. You don’t have to worry about giving us money and not having us come back. ”
Werstler says the reasons his company migrated to the 100% down policy are two-fold:
1. To improve cash flow, and
2. To gain control of the transaction – and collection – process.
“We’ve been collecting 100% down for a decade,” he says. “People would come in and say they could get the job for $100 less from Home Depot. My comment was, ‘Yes, but you have to pay 100% down.’ That didn’t seem to faze them. I thought, ‘Why should I do anything different?’ I was tired of chasing money – the nickel and dime stuff that was just sucking the life out of us. If Home Depot and Lowe’s could do it, I could do it. Then it became the challenge of getting our own people to go along with the program.”
According to Werstler, going to a cash-in-advance policy for residential customers was less of a shock to his retail customers than it was to his own employees. Getting buy-in from the sales force required a paradigm shift that, frankly, was uncomfortable at times.
Minimizing The Risk
“It always happens with any new salesperson,” Werstler explains. “They come to me and say they could get this great sale, but the customer only wants to put 50% down. I look at the salesperson and say, ‘That’s great. I’ll tell you what. I will allow you to do that, but you are going to have to personally sign for that countertop. If they pay us, no problem. However, if they don’t pay us or don’t pay any portion of it, then you are guaranteeing you will cover that out of your own pocket.’
“Quite frankly they are asking me to extend credit to someone I don’t know anything about, and if anything goes wrong, they are asking me to pay for it. I’ve never had a salesperson take me up on that arrangement.”
Werstler says the 100% down arrangement is one of the best things his company has ever done for saving time, increasing profitability and improving cash flow. Would that tactic work for your company? Keep in mind that retail residential projects account for roughly 25% of Tower Industries’ total volume – the remainder are commercial projects, each with a negotiated contract. This type of diversification provides a degree of flexibility that a company dealing 100% with retail customers probably wouldn’t enjoy.
In that case, the challenge becomes identifying segments of your business that could be converted to a “Cash and Carry” model. You might be surprised how a single business decision could transform what is now a headache that consumes a disproportionate percentage of your time into a tidy little cash-producing sideline.
Want to know more? At Moraware, we make software for countertop fabricators. CounterGo is countertop drawing, layout, and estimating software. JobTracker is scheduling software that helps you eliminate the time you waste looking for job folders. RemnantSwap is a free place to buy and sell granite remnants with fabricators near you.