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GOT AN IDEA?
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August 1, 2008
BCMA - It’s All About You! Welcome to the latest issue of BCMA News! 1. Where Have You Been? Credit issues triggering intensive reviews of orders usually involve problems like overdue balances or worrisome agency reports. At Rainbow Seafoods, Inc., it may only mean that the customer hasn't made a purchase in more than 30 days. "One of the biggest problems in a recession is the speed at which customers' credit strength can deteriorate," explains Controller Virginia Boutchie. "That's why a gap of 30 days or more is an issue." The 30-day business gap review may be a bit extreme, but Boutchie favors a very conservative policy through good times and bad. She's always on the alert of these nine warning signs: 1. Slow payments with trade creditors and banks. 2. Sharp reductions in checking and operating account balances. 3. Reductions in profitability. 4. Returned checks. 5. Willingness to purchase product at high prices. 6. Sharp increases in buying patterns. 7. Calls from customers "out of the blue." 8. Wide order cancellations or very inactive customers. 9. Heavy inventory with little movement. 2. Dealing With Lawyers Neil H. Butler, Esq. of the firm of Butler & Long some valuable tips on handling litigation. Here are 15 salient points to keep in mind when dealing with your attorneys. 1. Don’t delegate responsibility for litigation to lawyers. 2. Keep an eye on your attorneys. It’s not in their financial interest to get things done quickly. 3. Watch out for billing that lacks adequate details. 4. Don’t allow your attorneys to do too many depositions. There’s a direct correlation between how long a case goes on and how much it will cost you. (Have you ever had an attorney wait until a week before trial to tell you that your case is weak?) 5. Tell your attorney to set the depositions with opposing council to avoid cancellations. 6. Insist that you be informed of any problems immediately. 7. Start every litigation with a meeting during which you will frame a litigation plan. Determine the following: What documents do I need to assemble? What witnesses are needed? What legal issues must be researched? What discovery actions (expensive) need to be taken? Are the depositions necessary (relevant)? How long will the legal process take? (Don’t accept “I don’t know.”) 8. Put the plan in writing, and have your attorney write you each month to show you how he or she is following the plan. Ask what’s going to be done in the next 30 days. 9. Participate in the execution of the plan. Assemble whatever documents that you can. 10. Let your attorneys know that your evaluation of them will depend upon how well the plan is being expeditiously followed. 11. Have your attorneys send you a copy of every letter and every pleading that they receive. You must know what’s going on in the case. 12. If your attorneys are going to deviate from the plan, require them to consult you first. 13. Let them know the limit of their authority. Never, ever delegate a business decision to an attorney. 14. Set a limit on legal fees. Consider getting a fixed price for work done. Negotiate fees. It will be easier if you are giving them large volumes of work. Tell them that you’ve got a mass of legal work to get done. Ask them, “How much of it do you want? A little of it? A lot of it? All of it?” 15. Don’t stop looking for ways to settle before trial. 3. Speaking Out to Sales Having trouble cooperating with the sales department? Perhaps you’ve heard that popular piece of advice: make department-wide presentations about exactly what credit does, how it benefits the company as a whole, and how it might benefit the sales department. But what if your legs are shaking just thinking about standing up in front of a crowd? Then join that other crowd quaking at the back of the room. Most people fear public speaking with a passion. Fortunately, there are some things you can do to overcome your fear. Step One: Whatever the topic and whatever the audience, prepare carefully and fully. That means practice, practice, practice. A mirror, a spouse, or a supportive friend all work well. Step Two: Start with small, supportive audiences like church groups or community service organizations. Step Three: After building some confidence, consider making presentations to local credit association groups. Work to make your presentations tighter, more detailed, and more technical. Step Four: Speak to some of the friendlier (or, at least, less hostile) departments in your company. Step Five. The Big One. Make your presentation to sales. Some tips: Give your audience a gift -- some information that they don’t know and which will benefit them in some way. Give a fresh presentation each time. Use your passion. Sprinkle each presentation with personal anecdotes to liven it up. Lastly, don’t give up. You’ll get better and better. Norman Taylor was formally Director of Credit, Avondale Mills. Back to top 4. Negotiate Better Collection Deals Now If you make a collection call with compromise high on your agenda, chances are that you will compromise far too soon and end up conceding far too much. Negotiation is a process that leads to agreement; compromise is simply a tool that can be used to smooth the way. When you enter a negotiation, keep these five negotiation positions clearly in mind: Logic, power, and emotion are the primary positions; trade and compromise are the secondary ones. Primary Positions: Make Your Stand Here • Logic: State the merits of your case, emphasizing the sound reasons why you should be paid. • Power: Make the other party aware of your ability to invoke penalties or rewards. • Emotion: Introduce the human element. Goodwill and personal feelings affect the outcome of the deal. Secondary Positions: If Necessary, Fall Back Here • Trade: When you bargain with the other party, sometimes you will need to offer them something in return for meeting your requirements. • Compromise: Sometimes, one or the other, or both of you, must sacrifice something in order to come together. Example: Splitting the difference. Exploit the Primary Position Those who gain the most in negotiations spend most of their time arguing from a primary position, leaving it up to the other party to adopt a secondary position of trade or compromise. Quickly offering trades and compromises as soon as his position is questioned is the mark of the unskilled negotiator. As soon as the customer asks for more time to pay less, the unskilled and overanxious negotiator offers a trade or a compromise. Let's listen in while a credit manager makes a collection call and skillfully uses the primary positions to negotiate a best result. Credit Manager: Hi, John. I'm calling to ask you about that past due invoice for $25,000. Did you get our letters about it? (Logic) Customer: Yes, I got the letters, but we're having some cash flow problems. Credit Manager: I understand that, but we must come to an agreement now. I'm sure that you want to preserve the good relationship that we've developed over the years. (Emotion) Customer: Well, I don't think I'll be able to pay you much now. Credit Manager: Based on your cash flow, what can you do now? (Logic) Customer: How about $5,000 in two weeks and the balance in six weeks? (Compromise) Credit Manager: No. That's not acceptable. You're already 45 days behind on this. We'll need $5,000 today and the entire balance within 30 days. After all, I'm sure that you'll be needing our product soon. (Power) Customer: Well, how about if I pay the entire balance in 40 days. (Compromise) Credit Manager: We could live with that, but we can't wait that long for full payment. We need at least weekly payments. Let's do $7,000 today and $3,000 a week for the next six weeks. Can you mail the first check today? (Compromise) Customer: OK, I think we can do that. Credit Manager: I'm counting on it. I'll fax you an agreement so that we can memorialize our agreement. I understand your difficulties, and I want to work with you just as we've done for all of these years. (Emotion) Here, the credit manager used each position to move the customer closer to his requirements. Remember, most customers also can negotiate from primary positions. The customer could clearly state, "Look, this is all I can pay now. Case closed." But, the case isn't closed: He's simply negotiating by assuming the power position. Now, it's your move. You can accept his offer or revisit one or more of your previous primary positions, based on your analysis of his position. • Logic: Show him that his argument is unreasonable or without merit. • Power: Detail for him the consequences he will face if he refuses to reconsider. • Emotion: Explain how he is being unfair, or argue that he should reconsider for the sake of the relationship. If necessary, you can assume a secondary position. • Trade: Offer him something if he reconsiders. • Compromise: Split the difference. If you practice this process of negotiation, you will always achieve the best possible outcome. That's a big improvement over leaving yet another negotiation wondering what happened. Barry J. Elms is President of Strategic Negotiations International, Newburyport, Massachusetts. To learn more about subscribing to Credit Today, check out our web site at http://www.credittoday.com/ Productivity Opportunity Checklist - How Productive Are You- Where Should You Improve- Survey Results: Credit Executive Attitudes Towards Outsourcing Strongly Affected by Experiences With Receivables OutsourcingBenchmarking Collection Agencies- Tips for Maximizing Your Relationship With Your Collection Agency
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