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Sep 01 2017
A Key Characteristic for Credit Professionals
Allen Vickers, CCE, A & K Railroad Materials

Outside of the credit profession do many others realize the importance that credit plays in their lives or is it like your sprinkling system - you don't think about it until it isn't functioning properly? In today's modern world, credit is the fuel that drives our economy. Countries, local governments, businesses, and even households may virtually collapse without credit.

Because credit plays such a vital role in the world economy, what is one of the key characteristics necessary for a person in credit to be a more effective professional? You be the judge.

What if a customer with a credit limit of $100,000 wants $600,000 of material for an out-of-state job site? And what if he states there is an agreement with the project owner that will delay payment for 90 days? The agreement allows 30 days for shipment of materials, 30 days more for inspection and acceptance of the materials, and another 30 days for payments to be processed. To make things more interesting, what if during your due-diligence of this project owner (a multi-billion-dollar company) you discover that they are financially distressed?

In many instances, credit professionals have learned that if contractors have difficulties in getting paid, they often have difficulties in paying you. Still it is your job to find a way to help the customer, help your company make a sale, while protecting the assets of your company at the same time. With that in mind, you call your customer to discuss your findings, while expressing concern over his ability to receive payment.

His reaction was one of shock. "What? I have been doing work for this customer off and on for 15 years! They have always paid me. And besides, they are a huge company!"

This is one of those "tightrope situations" where you choose your words carefully. First, you acknowledge that your crystal ball isn't 100% accurate always but that there is a strong possibility that the project owner will file bankruptcy reorganization within 6 to 9 months. Second, simply put, you would hate to see his company caught in the middle of such a filing.

"Well what can I do? I have signed an Agreement. This job is worth much more than just the price of these materials."

Consequently, you ask the customer to email in a copy of the agreement, promising to study it and respond back soon; hopefully with a solution that addresses the concerns of all parties.

After reviewing the agreement several times, your customer is contacted the following day. During the call, some options begin to surface, which are discussed.

To begin with, your hope is none of these precautions prove necessary, however your suggestions include: 

  1. An unloading spot is obtained next to or near the owner's plant.
  2. The materials will be delivered and inspected at that spot.
  3. After a satisfactory inspection of the material, the Project Owner can request payment from their headquarters.
  4. Meanwhile, as the materials are held, they will be covered by a UCC-1 filing.
  5. Upon receipt of payment, the material will be released for installation.

With this approach, the customer could be paid on what amounted to a Contemporaneous Exchange for New Value and reduce his exposure in a bankruptcy if the project owner were to file. Although your customer has his doubts about all this being necessary, he does realize it is for his protection.

The good news is that precautionary steps went according to the proposal. Your customer got paid and your company did too! The project owner ... filed for re-organization 5 months later on $3.22 billion dollars of debt. Although your customer still thought the company would have found a way to pay him, he remarks, "I can't believe they filed. Thank you."

Texts and manuals note there are 6 to 7 key characteristics that the right credit employee should possess. You have probably seen the list. The job description typically lists things like commitment, good communication skills, goal oriented, organized, detail focused, financial knowledge, flexible, dependable, and a problem solver. Depending on the level of responsibility, the position may also require someone that is experienced in credit, have a degree or certification, acted previously as a supervisor, and must have analytical capabilities as well as other technical skills.

Too often, the topic of building relationships is not discussed for positions in credit. Yet with the exception of sales, customers may speak with the credit department more than any other department within your company.

In credit, once an order is placed, the sale is not over - it is really just beginning!

If your company is linked to a customer problem such as a delivery issue, wrong product, or a billing error, resolutions cannot happen fast enough to be part of good customer service. On the other hand, if there is a problem on the customer's side, it often pays dividends to take time to listen, and problem solve together.

Credit management is an extension of your company. If customers are treated well and service is good, payments can reflect that. One company executive put it this way - "I would rather make sure we pay first the people we like."

The proactive credit management approach is to actively build customer relationships. All representatives of credit can act as an integral part of that building process with the goal of enhancing one of the key aspects of modern business -  relationships!