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Aug 01 2013
Cooperation and Fairness When Dealing with Debtors
Melissa Mickelsen, CBF, Geneva Rock Products, Inc.

The NACM Canons of Business Credit Ethics state that "Cooperation, fairness and honesty must dominate in all insolvent debtor proceedings." Further, the Canons state that "Creditors must render all possible assistance to honest debtors who become insolvent."


As credit professionals, do we ever struggle with this pledge? Do we occasionally want debtors to pay, and not just in the monetary sense, for the problems they have caused? Are we guilty of holding a grudge or harboring anger? Or are we guilty of reluctance when it comes to cooperating with honest debtors who have found themselves in trouble?


Human nature demands fairness, but unfortunately, in the credit profession, we may not always feel that our definition of fairness has prevailed. For example, it is not fair that we provide supplies or services promptly, but are often not paid promptly. It is not fair when we are not paid the full balance owing to us due to a debtor's insolvency. And, it is not fair that some of those debtors, the ones who may not be so honest, simply do not care that they have not paid for what they have received.


But, it is our responsibility as credit professionals to look past these mental stumbling blocks and behave in a manner that is beyond reproach. As a group, we must act in a way that distinguishes us as the professionals we are. We must overcome feelings of anger and frustration and cooperate with honest debtors to ensure the best outcome for all parties.


Giving our customers the benefit of the doubt can help ensure that cooperation and fairness are achieved when dealing with struggling debtors. We should assume that our debtor is an honest debtor until it is proven otherwise. We should assume that they have honest intentions to pay what is owed. And, we should assume that they will strive to do what is needed to comply with payment arrangements.


With these assumptions in mind, we can move forward in "rendering all possible assistance" to insolvent debtors. We can adopt a team mentality with the understanding that working together to solve the problem will benefit both the debtor and our company. Often a debtor will be more inclined to work with someone who treats them with respect and fairness. If they sense that we are invested in finding the best possible solution, they will probably be more likely to work hard and make the sacrifices needed to ensure we are paid. We all know that customers tend to pay the people they like first. So even in more serious situations, it probably pays to be the person the debtor likes or, at the very least, respects.


Of course there will be instances when a more hard line approach will be needed. But, even a hard line approach can, and should be, delivered with fairness and honesty. And of course, our first responsibility is to our company, so we should always ensure that we are protecting our company's legal rights and avenues for collection.


As credit professionals we should be wary of the cynicism that often creeps into our profession. A scornful, jaded or negative attitude can erode efforts to find positive solutions. And when anger, resentfulness or cynicism prevails, we might even be blinded into pursuing collection efforts that are not truly necessary or cost effective just so we can prove a point.


Ralph Charell stated: "It is through cooperation, rather than conflict, that your greatest successes will be derived." As we follow the Canons of Business Credit Ethics and offer our honest debtors the cooperation and fairness they deserve, we will continue to find success as credit professionals.