Category Archives: Practical Tips & Common Sense in Credit

Business to Business Credit, Credit Wisdom, NACM News, Practical Tips & Common Sense in Credit

ICEL Recap: Stop Being Bullied by Bad Customers

Posted by on June 3, 2013 at 8:05 pm.

by Shane Inglesby, CCE, Geneva Rock Products, Inc.

Nina Flurer, CCE, a regional credit manager with H&E Equipment Services, Inc. presented at the May ICEL meeting. She addressed the topic of how to stop being bullied by bad customers – a topic to which most all credit managers can relate.

Ironically enough, the term bully can be abused (no pun intended). Just because someone engages in behavior that someone does not like or agree with, does not necessarily mean it is abusive. Nina encouraged attendees to incorporate the “reasonable person test.” This test requires asking if most people would consider what the other person is saying or doing to be inappropriate or unacceptable.

Once it has been determined that the actions of a customer are that of a bully, his or her actions will typically fall into one of two categories – explosive or coercive. Explosive behaviors will include threats, fright or harm. Coercive behavior will often times include threats or actual force.

Bullying behavior is typically only experienced when three variables come together: a desperate customer must perceive some type of weakness in an individual and/or organization and that organization or individual must demonstrate evadable policies. Read full article

Business to Business Credit, Credit Wisdom, Practical Tips & Common Sense in Credit

The Imperative Partnership Between Credit & Sales

Posted by on April 3, 2013 at 3:08 pm.

By Bryan Simnitt, Director of Sales, Nicholas & Company

The Partnership between sales and credit is imperative for success.

Why the sales driven organization must encourage partnership between sales and credit to succeed.

The selling team of yesteryear would have a hard time getting along, or even understanding the business world of today. Things have changed such that a client’s credit worthiness is just as, or even more important than, the gross revenue potential of that coveted client. In the old days when the “big sale” ruled all, we (the selling organization) kept the credit department quite busy cleaning up when one of those big sales turned into a big collection nightmare.

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Business to Business Credit, Credit Wisdom, Practical Tips & Common Sense in Credit

Credit/Sales Smack Down

Posted by on March 4, 2013 at 6:46 pm.

By Georgette Bevan, CCE, NACM Business Credit Services

Have you experienced ballistic moments dealing with sales people? If you have, you are not alone. At times, the friction between credit & sales produces a duel of epic proportion; well it seems like it at the time.

Sales: Excited voice “I have a new customer that is ‘golden’ and they want to buy A LOT – RIGHT NOW!”

Credit: Up go the hackles . . . “Ummm, looking at their credit report and payment history, the only possible way we can sell them is cash in advance.”

Sales: Angry “Oh Come On! They’re good for it!”

Credit and sales have very different personality traits. No wonder there is friction between credit and sales – they are complete opposites.

 Personality traits of credit & sales

Credit

Pessimistic

Non-risk takers

Conservative at all costs

Analytical

Want to see the proof in black & white

 Sales

Optimistic

Risk takers

Driven to make the sale

Adept at overcoming obstacles

Champion at getting people to say “yes”

 While credit and sales are two separate departments yet they do have common goals . . .

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Business to Business Credit, Credit Wisdom, Practical Tips & Common Sense in Credit

Odds It’s Fraud

Posted by on February 8, 2013 at 4:12 pm.

By Georgette Bevan, CCE, NACM Business Credit Services

Business credit fraud is an intentional plot to scam a business out of “value” without payment. This may be accomplished by providing a credit department with carefully crafted inaccurate information hoping that it goes unnoticed thus allowing the flimflam artist to get away with as much value as possible.

Let’s look at an attempted fraud scenario that happened recently in Utah.

An NACM member received a phone order from a caller in Ohio declaring that they had a “staple emergency” and needed product to be “shipped immediately” through their preferred shipping agent. The member contacted the shipping agent through the Hotmail email address provided and requested a freight quote. An International Shipping Quote was received. The Member received an email from the customer’s Gmail account with instructions to ship overseas and to send them an invoice for full amount of project (product plus freight). Credit card information was provided for payment. The Member was instructed to pay several thousand dollars in freight charges upfront to ship the material. This is where the red flags went up.

The Member asked for the name on the credit card and was given a man’s name. When they called MasterCard to verify they were informed that the card had been issued to a woman.

When your gut feel tells you something is wrong – start reading between the lines and look deeper. Let’s take a closer look at the warnings signs of fraud in this scenario.

Payment upfront - If a customer asks you to advance costs (or pay upfront in their behalf) be cautious. Even if you’ve been given payment in the form of a credit card, a check or even a cashier’s check, you may get left holding the bag when you find out the money is not there. Always verify funds are received before paying up front or refunding money. Asking for the name on the card, the billing address, zip code, card authorization number – any and all information you can as a standard procedure is a good business practice.

Does it make sense? Why is someone in Ohio calling Utah to order material to ship to Denmark? Are there closer sources of supply for this product? Is the request routine to your business or is it unusual?

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Business to Business Credit, Practical Tips & Common Sense in Credit

How to Measure Collection Effectiveness

Posted by on September 28, 2011 at 9:28 pm.

Days Sales Outstanding (DSO)

Days Sales Outstanding (DSO) measures the average number of days it takes a company to collect payment of invoices. Tracking DSO helps a company determine their collection effectiveness and may indicate whether current credit policies and procedures require modification. In the current economy and shifting industry conditions, it is particularly important to monitor collection effectiveness and bad debt write-offs.

DSO Calculation:

Accounts Receivable Total/Sales per Day

Example:

150,000 Accounts Receivable/,257,000 Annual Sales/360 days per year

OR

150,000/3,492 = 43 days

There are a number of ways to calculate DSO sales per day:

� Annually (annual sales total/360 days)

� Monthly (monthly sales total/30 days)

� Quarterly (quarterly sales total/90)

Because atypical sales numbers impact DSO, a three month rolling average may be used to minimize distortions (previous 3 month sales/90).

Terms of sales and credit policy both impact DSO. The closer the DSO is to your terms of sale, the more effective your collection efforts.

When DSO is reduced, more internal operational cash is available to fund company operations and reduce interest expense. How does your DSO compare to other companies in your
industry? Industry specific data by *SIC/NAICS Code are available from Annual Statement Studies http://www.rmahq.org and Credit Research Foundation http://www.crfonline.org

*SIC = OSHA’s Specific Industry Classification system

NAICS= North American Industry Classification System

Other Credit Function Measurements:
Best Possible DSO
Average Days Delinquent
Collection Effectiveness Index
Percent Current
Percent AR Greater Than 60 Days
Percent AR Greater Than 180 Days
Gross Bad Debt as % of Sales

Business to Business Credit, Credit Wisdom, NACM Professional Designation/Certification, Practical Tips & Common Sense in Credit

Avoid Expensive A/R Credit Lessons with Education

Posted by on August 5, 2011 at 5:07 pm.

“The difference between school and life? In school, you’re taught a lesson and given a test. In life, you’re given a test that teaches you a lesson.” Tom Bodett

Lessons learned in a credit department of a business may be costly. How often could a bit of knowledge have saved thousands of dollars - if only they’d known.

The Basics That Every Credit Department Should Know:
*The customer’s legal formation where is the financial strength and who is legally liable for debt.

*The 5 C’s of Credit the essence of evaluating customer information and making good credit decisions.

View related article on The Five C’s
The Five C’s of Credit in Today’s Economy

View full article

Practical Tips & Common Sense in Credit

Practical Tips & Common Sense in Credit

Posted by on July 6, 2011 at 2:59 pm.

By Georgette Bevan, CCE, NACM Business Credit Services

Invoice every business day.
The sooner you present the invoice to your customer, the sooner it can be processed and payment received. Invoices that sit in limbo tie up money that could be used to run the business. Cash flow is king.