From Payable to Paid

If there is a fun part to the fuel oil business, collections probably isn’t it.

Whether they pursue payment on their own or with help from a software program or a third party, some dealers and accounts receivable experts said a preferred approach is to press repeatedly for prompt payment on recent deliveries, as opposed to observing the traditional 30-day billing intervals. It’s a tactic designed to maintain a revenue stream and minimize the number of accounts that end in time-consuming and potentially costly collections action.

‘Traditionally, you deliver the oil and you hope you get paid,” said Rocky DeSimone, owner of Wyman Energy in Manchester, Conn. His company used to bill at 30-day intervals. Not since his company started working with Transworld Systems, about three years ago. Wyman Energy waits ‘a week or two,” DeSimone said. If payment isn’t forthcoming, management of the account is handed over to Transworld, which promptly re-sends the statement to the customer, repeatedly if necessary, DeSimone said. ‘Generally speaking that portion of it has worked like a charm,” he said.

In simple terms, this is an accelerated approach, said Frank Lorenzo, a representative of Transworld Systems who is based in Weathersfield, Conn., and works with fuel oil dealers. ‘It is not collections,” Lorenzo said. ‘It is first party billing reminders and phone calls, in the client’s name, every few days, early in the age of the receivable. It is outsourcing a necessary office function that our clients should do but can’t afford to do internally.”

The accelerated approach is a way to deal with current economic and industry conditions, Lorenzo said. ‘The environment that the dealers are living in right now is a lot different than it was a couple of years ago,” he said. ‘There’s less money around, people are out of work, people are pinching their pennies and trying to find out who they can pay slower. Consequently, if you don’t ask early and often, you may not get paid.”

Accounts that go unpaid for 120 days, and require special calls and dunning letters are to be avoided more than ever now, Lorenzo said. ‘By the time an account gets to be that old it’s already too late” in many cases, Lorenzo said. Further, he said, ‘Sometimes when it comes to the job of collecting money the [oil dealer’s] staff is reluctant. It’s not pleasant to do.”

Transworld Systems Inc., headquartered in Santa Rosa, Calif., is a traditional collections agency that evolved to offer the additional service of accounts receivable management, Lorenzo said.

For fuel oil dealers, ‘We will contact their customer in their name” ‘ not as a collection agency, Lorenzo said. Oil dealers can choose to have Transworld make phone calls and send bills every five or seven or ten days ‘ ‘Whatever time period they choose. That way we’re concentrating all the effort in a window where they’re more likely to get paid,” Lorenzo said. Using that approach, Transworld has realized for some customers a greater than 90 percent payment rate on accounts that are 31 to 60 days old, Lorenzo said.

Lorenzo said that he has negotiated a flat rate, approximately $12 per account, with state associations such as the Independent Connecticut Petroleum Association and the Oil Heat Council of New Hampshire, to perform the accelerated service for dealers. Consumers pay their bill directly to the oil dealer.

Through partnerships, Transworld is able to extract pertinent account data from most of the enterprise software systems that dealers use, Lorenzo said.

(Lorenzo said he was working to schedule webinars for dealers interested in how Transworld System’s accelerated process works. For more information, contact him at frank.lorenzo@transworldsystems.com, 800-475-0009 ext.22.).

Many dealers have ‘too much money tangled up in receivables,” he said. ‘The attitude used to be, ‘It’s all part of doing business.’ Well, it doesn’t have to be.”

Como Oil and Propane, Duluth, Minn., uses ADD Systems software to manage the accounts of approximately 6,000 fuel oil customers and approximately 15,000 propane customers, said Bobbie Suomela, Como’s enterprise software administrator.

The collections component of the software helps Como Oil and Propane, which has nine divisions spread throughout Minnesota and Wisconsin, keep track of the status of all those accounts, Suomela said, including dunning letters that are sent to slow and late payers. Como Oil has used the software since 1999. ‘There’s a process you go through,” she said. ‘Hopefully they pay before you get to the end ‘ courts and all that.” While a handful of cases finally must be taken to court, the majority of slow and late payers do finally pay without the dealer having to take that ultimate step, Suomela said.

‘We work with them,” she said. ‘They pay a little bit here and there. We don’t usually stop a delivery.” Instead, it is made clear that payment must be received for the next delivery, ‘and a little bit toward your balance, which usually works pretty well,” Suomela said.

The ADD Systems software provides a general guideline that Como Oil adapts where the accounts receivable personnel want to make exceptions. ‘Not everything is black and white,” Suomela said.

With some 21,000 oil and propane accounts altogether, Como Oil accounts receivable personnel rely on the system to keep track of the status of each one, ‘for working budget accounts, running reports” and so on, Suomela said. ‘They work on it every day so they can keep up with it.” A credit manager works with customer service, she added.

Suomela’s duties include training backups in each division so that if someone is out, ‘someone can step into their position and keep the flow going. That’s an ongoing process. Our goal is to make sure every division is operating the same.”

‘Working collections you have to do a little bit every day otherwise you get behind the eight ball,” said James Gillis, applications specialist, ADD Systems, Flanders, N.J.

The credit module in ADD Energy E3 enterprise software allows dealers to put credit actions on accounts ‘whether it be a phone call or a promised payment or to put the customer on delivery hold in extreme situations,” Gillis said. Users can then pull reports that remind them when follow up action is needed. ‘That’s why we preach using the application to work credit all year long,” Gillis said.

Accounts receivable personnel talk to hundreds if not thousands of people during a month, Gillis said. Using the software for credit actions and setting automated reminders to follow up ‘keeps it from becoming an overwhelming project.”

‘Some dealers are very aggressive and work their collections hard every day,” Gillis noted, while others might be operating in areas that have been hit harder economically and for that reason they may feel obliged to work more with customers. The software can help a fuel oil dealer maintain communications with customers, and possibly work out a payment arrangement, Gillis said.

Pointing people to assistance programs or steering them toward a budget payment program are further options, Gillis added.

I’m a firm believer that you can work out an arrangement with just about any customer,” Gillis said.  ‘Every customer is important. Dealers hate to lose one.”