Author’s note:

This chapter is from a book titled: “How Would Confucius Collect a Past Due Invoice”, which  includes imagined strategies from such notables as Freud, Jesus of Nazareth, Donald Trump and of course, Confucius([1]). All people, I could be reasonably assured, would be known to most readers. Peter Drucker? Perhaps not so much. So, allow me if I may: ‘Peter Drucker was an Austrian-born American management consultant. The author of many books on management, his writings contributed heavily to the philosophical and practical foundations of the modern business corporation.


So, how would Peter Drucker collect a past-due invoice?

He wouldn’t.

At least, he would not collect or attempt to collect himself. The author of many books on Management, including the classic of the same name, about 495 pages as I recall, Peter’s forte was ‘management’. It is only expected he would direct an individual or a group, never pick up a telephone or send an e-mail to a client who was 30 days past due.

Drucker had a lengthy experience of working with non-profits, like charities. When he was asked if he taught charities how to fund raise, he said, “No, I know nothing about fund-raising. I taught them how to manage.”

I have little doubt that when it comes to ‘receivables management’ Peter Drucker would focus on the last word. Just like any other aspect of an organization, ‘receivables’ needs effective management. He would not teach anyone how to collect, “I know nothing about it,” I can hear him say with his German accent, “but I can help you with management.”

First, he would want to know what it is you are trying to manage. What is your business? If he was to ask that question to receivables managers, most would hesitate for a few seconds, maybe longer, before saying, “Our business is to collect.”

Shaking his head, Drucker would disagree. “Collecting money may be what takes up a lot of your time, but I contend your business is to maintain a customer relationship. A lot of money and effort has been expended to bring a customer to purchase your product or service. You want the customer to pay you of course, on time as agreed, but you want them to return and deal with you again and even if it should get to the point of more serious or even legal collection efforts, you want them to speak well of your organization. That, my friend,” he would conclude, “is the business of effective receivables management.”

If Peter was consulting with you, he would have a lot of questions. He was fond of saying, ‘getting the right answer, is a matter of asking the right question’. He might ask what you are trying to improve in your organization and perhaps more particularly, how you would measure success. “You can’t manage what you can’t measure and if you can’t measure it, you can’t improve it.’’ In most collection departments, our measurements are on delinquency, daily sales outstanding, amount and percent of write-offs – all measurements that may be achieved at the cost of sales! No wonder we’re sometimes referred to as ‘the sales prevention department’.

Is your best collector the one who brings in the most past-due dollars or saves the most customers?

Finally, Peter would say that you need to know your customers, yourself and your team. If you know your customers well, you can be on your way to developing a strategy where they almost collect themselves. For you and your team, answer the question ‘what are you good at?’ This will lead you to the next question of: ‘what do you need to learn so that you and the team get the full benefit of your strengths?’

Few of us ever ask this question.

[1] No, I didn’t expect those names in the same sentence either.