Ways to cut credit losses

IllS is rro tirnc to lct rr custontcr' ovcrcrterrtl lris crcrlit or givc in shirk_l linlrrr- crcrlit to il cLrstolrcr cilrl corrrlitiorr.

5 Step Telephone Collection

(l) Call the person who signs the check.

Q) Call him/her by nanre, being as personable as possible.

(3) Ask why the payment is late and listen to the explanation.

(4) [)iscover the real reason lbr non-payment. Ile synrpathetic. Ofl'er prontpt adjustment if they are dissatislied with nraterial or service. A positive attitude will oflen speed payment.

(5) Work out details such as date to expect check, or time to call back befclre concluding the call.

"Credit prol'essionals oflen allow custonrers to delay paying on their accounts, but when we wait too long, we nray flnd that account has gone into bankruptcy," comments the credit manager for a large retail lunrber conrpany. "We're all guilty of allowing a custonrer to delay for up to 90 days. In my experience, when a cLlstollrcr ilclitvs lol thrrt long, thc cl.rlrtccs ol gctting rrrry'tlring itrc l)ritcticirlll rril. Whcn .you trllow lr cr.rstontcr to rlclirv pirynrcnt, \'oLl ltrc scttirtg trlt -\'otlr cotttl)irttr' lirr ir loss."

( rctlit nrilnitgcrs ncctl to sct ir cLrtoll'linrit lirr crctlit lor clrch custorncr. 'l'lrc poirrt abovc which crcrlit will not bc grirrrtcci nrust bc vigihntly nrlirrtirirrctl to lr,oid risk lirr thc contllit r1 !'.

,,\lthoLrglr crcclit nlrrrirgcrs lirllow vari<lus guirlclincs to rlcte.rrrrinc thc crcrlit linrit l<lr cach custollcr, tra(lc rclcrcnccs. pr,rrchusing rrcccls und llnlncial crlnrlitions sccll Io be consturtls irr thc building ntutcrial indLrstry llis conrpany also subntits the crcdit references to a builcling industry credit association for verification. This enables hinr to discover if anyone has had a problent with the ac-

"('rcclit lirrcs lrrc rcvicwcrl on a claill basis," lrotcs thc gcrrcral crcclit nranaS,cr ut a largc chairr. "l gct reports cvcry day. Wc pLlt a rc(l l)ag on llry accoLlnt that is within l0{1, ol'the creclit linrit."

Arrothcr crctlit rrrrrrrrrgcr rcquircs all thosc sccking crctlit to contltlete a conrprchcnsive creclit application. This conrpany rcquircs at least lbur trade rcf'crenccs with two f'ront within thc bLrilcling ntaterials industry. "Current trade infbrnration is essential, but we also look at how Iong thc conrpany has been in business," he cxplains. "lf- there's no trade infornration, we work with the customer on a C.O.[). basis."

(()unl it\ rre ll;rs 0bllrirriIg lr trerlit |cl)( til.

( )nr' l,lrFL ltrnttle r r'rrntl),1)\ l\ l)t- t;rllt ertetttls ttetlrl ilt ;rnroLrnts bclrret'tt l{l-li' ol lllr'torrrl);ll\'\ ncI rrorllt on iu) Lrr\u(r.rferl blrsis with rto lrcrt rigltts ()r' \t()l) rrotiee rigltts I hc erlrtl tlolllrt ill()Lltl :et tlcPerrtls ort tlte totltprrtti's llrtlrrtr'rlrl tlrgrlll jly'. "l gct this irrlirlnrrrtiorr lrorn :rrrtlrtcd linlrrtcilrl stittcnre nts. l)un & llrrtlslrcct rittillg,s rrrrtl tratlc lcl'ercrtt'es fi<lnt thc credit rrssocratiorr lrs rrcll as thc rrr.rnrbcr ol'lears thcy hrrr c hccn in busincss." lhc v.p. irrrd tretlit rttanagcr sir\s. "ll'thcy hrrvert'1 bccrr irr btrsir.rcss vcrr' lorrg or don't Irrrr c rrrrr rrLrtlitctl Iin;rnciirl stltlenrcnls. I rrrrr lrcsitirnt to givc t rctlit * rthorrt sonrc kintl ol'guilrlntcc."

I lc rrscs t tctlit irtsurlrrcc to.justily lur tnrse(ure(l tlcrlit linc or whcrr the iull()r.lnt ol tlctlit rcclLrirctl is rrrorc thlrrt thc e()nll)lrnv's nct worth ulrrri|ll t s.

( )nc hrriltlirrg nratcrills rctlrile r, w l.ro scrvcs srntrll contrirctors lrrtl rcr.ttotlclcrs witlroLrt sophisticltcrl irce()untrng svslclns, rcl'icws blrnk stirtcnrcnts lrrttl unaurlitetl llnancial stlrtclltclrts. tltc conrlllrrrr''s working cirpitlrl lrntl trlrrlc rcl'crcrrccs to nrirkc his crctlit tlccisiorrs.

Story at a Glance

Credit managers offer tips on how to draw credit line points to consider before granting credit waysto limitfinancial risks for your company.

('alling hinrscll' conservutive with crcclit linrits, hc ncttcs that "il thcy're askirrg lbr credit up to S2,(X)0. wc crtcncl it with lcss of a prolilc. Anrounts bctweerr S2,000 arrcl $5,000 rlcpcnd on their llnancial corrclition arrd history. Anything over S5.000 is grantecl on a.job basis."

I le sunrntarircs the creclit inspectiorr as "lookirrg at the thrcc C's ol' creclit: Capital (thc contpany's financial condition). Character (how they pay other suppliers) and C'apacity (business potential and potential fbr bringing other business to his store ) "

Regardless of the ntethods used, credit nranagers reconrntend being cautious and keeping risks at a minimunr.