thechart


By clicking on First National Merchant Solution's logo, you will be leaving this web site. Products and services accessed through this link are not provided or guaranteed by your Business Credit Management Association (BCMA). First National Merchant Solutions may have a privacy policy that is different than your BCMA Affiliate. Please review First National Merchant Solutions privacy policy. BCMA MEMBERS NACM Credit Services, Inc. Pennsylvania Association of Credit Management Wisconsin Credit Association GOT AN IDEA? Would you like to contribute to the BCMA Newsletter? The most important part is your idea. We can handle the polishing. Just write to us at BCMAEditor@ CreditToday.net with your idea!		February 1, 2008 BCMA - It’s All About You! Welcome to the latest issue of BCMA News! This month’s topics… 1. Thinking About Selling Overseas? A Signed Credit Agreement Can Help When You Need to Collect 2. Dr. Credit: It's Not Who You Know, It's What You Know That Counts 3. Top 10 Signs of Impending Bankruptcy 4. What Services Should You Demand of an Outside Collection Agency? 1. Thinking About Selling Overseas? A Signed Credit Agreement Can Help When You Need to Collect Whether you sell on cash in advance, letter of credit, or open account terms, obtaining a signed credit agreement from the customer before shipment is important to provide you with favorable terms for collecting payment from the customer. Even Cash Can Be a Problem Without a signed agreement, you'll be operating under the terms contained in your customer's purchase order and your own invoice. These documents may contain conflicting or inadequate terms that will not serve you well in the collection process. A credit agreement is important even with a letter of credit or cash sale: It can unintentionally turn into a collection situation if goods are shipped before the cash is received or a defect shows up in the letter of credit. Make the Customer Make a Decision Your credit agreement should be a preprinted form. With today's sophisticated word processing programs, creating your own form is relatively easy. A form gives you a negotiating edge: The customer is faced with either accepting your standard terms or asking for special deviations. Don't Be a Bank: Set High Rates Your form should provide for interest on any unpaid balance. The interest rate should be high enough to act as an incentive for the customer to obtain financing to pay the invoice rather than using your company as a bank. Use a minimum rate of 21 percent. State that all payments are to be made in U.S. dollars: This eliminates currency risk to your company. Get Pertinent Information Now- While It's Easy to Do So Provide blanks for information about the customer. Be sure to ask for the customer's complete name (i.e., "Acme Sales and Leasing of England, Ltd." rather than "Acme Sales"). Also, find out the type of business entity (corporation, association, partnership, sole proprietor, limited liability company), the name and title of the person signing the credit agreement, and whether that person has the authority to enter into contracts for the customer. Location, Location, Jurisdiction Include a provision allowing your company the "reasonable costs of collection, including attorney's fees." Should a lawsuit be required, you want U.S. law to apply and your local court to hear the case. State that applicable law and jurisdiction is that of your home state "to the exclusion of all others." Time Is Not on Your Side The United Nations Convention on Contracts for the International Sales of Goods allows up to two years for a purchaser to reject goods for non-conformity if no shorter time period is specified by the parties. Therefore, you should designate a time limit for identifying product defects. Thirty days is a good rule of thumb, but shorter times are appropriate for perishable goods. Plan Now for a Collection Problem Although there are several other provisions that should be included in your credit application, the above are particularly important for international transactions. Making use of these tools will help you in the event that payment becomes a problem. Back to top 2. Dr. Credit: It's Not Who You Know, It's What You Know That Counts Dear Dr. Credit: I'm concerned about the rapid changes that are taking place in credit management. I don't want to be left behind. What can I do to make sure that doesn't happen? - Concerned Dear Concerned, You're right to be concerned. The advancement of technology allied with downsizing and corporate mergers has created a working environment that no longer offers job security for life. Survival in this ever-changing business climate means producing results that will get you noticed and improve your value to the company. Nothing impacts results more than knowledge. There are many aspects of knowledge that impact the performance of the credit department: knowing your company and its products and services, knowing your competition, and understanding why customers buy from you. But nothing is more results driven than knowing your job, so let's take a look at how to gather and use the kind of knowledge that will build your reputation as a true credit professional. Here are five ways to gather knowledge of credit management that will have a direct impact on your success. 1. Credit Publications: Keeping informed about the latest developments and trends is vital to achieving peak performance. All it takes is an hour or two each month to browse through Credit Today and Business Credit as well as several other key publications to stay in touch with your profession. 2. Seminars and Conferences: There is no better way to get quick, practical, job-relevant knowledge than an effective seminar or conference. A good seminar can revitalize stressed out team members and give them skills they can use on the job the very next day. Make it part of your corporate policy to allocate at least 2 percent of your business year to attend conferences and seminars. 3. Industry Groups: Smart credit professionals recognize the value of belonging to an industry group. The customer and industry-specific information that can be gained from attending these industry group meetings is often priceless. Just one nugget of information about a customer could save your company many thousands of dollars and make you look good in the process. 4. Industry and Economic Trends Reports: There are a number of valuable reports available, some of which are quite expensive and some of which are free 5. Credentials: Most working people have a several kinds of insurance coverage: house, auto, health, and life policies. But how many people have job insurance? An advanced university degree and NACM's CCE credentialling program are not, literally, job insurance, but they come as close to creating job security and peace of mind as you can get in the credit profession today. A credit professional who has achieved an advanced degree or CCE status is respected throughout the business community and can command the best jobs with the best pay. Sounds to me like a good enough reason to get started. Back to top 3. Top 10 Signs of Impending Bankruptcy The business cycle continues to wax and wane. Be on the lookout for the top 10 signs that a company might be facing bankruptcy. 10. The customer starts paying beyond terms. The manner in which a company handles its credit is like a fingerprint: It reflects the company's cash flow, its payment policies, its ability to collect its accounts receivable, and many other signs of financial health. Even a 30-day change can mean trouble is on the horizon. Remember, trade creditors are selling to the customer, not financing its business. 9. The accounts payable department doesn't return calls. The credit manager notices a change in the payment history. She places a call to the accounts payable department. Nobody there can help her. They offer to return the call. The call isn't returned. When you do manage to talk to someone about the account, make a record of who says what to you and when they say it. If there are inconsistencies, beware. Financially sound companies don't give their creditors the runaround. 8. The creditor wants to increase its credit line with no justification. The customer's business doesn't seem to be expanding. Your company is not its principal supplier. Suddenly, the customer places a large order. How do you know that you'll be paid? The customer will convert your product into inventory, and some of that inventory will turn into accounts receivable. And, the customer's bank has a lien on all of the inventory and accounts receivable. Don't let your customer turn you into an investor or a banker! 7. You get a lulling letter. Things have been bad for your customer. Payment has been slow, even sporadic. Your accounts from this company are over 90-days old. You get a letter from the customer saying that things have been bad but that soon everything will be better. Guess what? It won't get better. Even though you risk a preference action, get the customer to pay down your debt. Don't ship new goods unless you get paid for them at the same time. Get the debtor to pay for some of the old debt. 6. You get paid in the form of a lump sum that is less than what is due. This is the revolving credit card syndrome. Some debtors think that an invoice is an invitation to pay rather than an obligation. They think its fine as long as they pay something on the account. There's just one problem: Accounts receivable don't pay your bills. Cash does. When account debtors pay in lump sums, don't earmark to particular invoices, and leave you in the dark, they are asking you to capitalize their operations. Let someone else do that. Consider shipping to such customers only on a C.O.D basis. 5. The debtor's name comes up at credit association meetings. If many creditors in an industry are experiencing deteriorating performance by an account debtor, a creditors' committee may well be the next future development. 4. Multiple lawsuits are filed against the debtor. Lawsuits are a part of business life. Products fail to work. Goods don't meet specifications. A few such suits are normal. However, a debtor that is swallowed up in litigation cannot function. Be particularly cautious if the debtor is on the wrong side of mass litigation. Even the best company can be overwhelmed. 3. Collection lawsuits are filed against the debtor. Diligent creditors sue for collection. Credit services issue alerts about new lawsuits. Watch out! When multiple judgments are entered against a debtor on collection lawsuits, the debtor is in serious trouble. 2. The debtor faces tax assessments, liens, and levies. If an account debtor can't raise funds to take care of its operations, it may "forget" to pay its withholding taxes. Take immediate action. Don't sell anything on credit. Insist on C.O.D. 1. A petition of involuntary bankruptcy is filed. Maybe it will be dismissed. Maybe it won't. But if it is filed, the effective date for purposes of preferences and avoidances will be the date of filing. Although gap creditors will be entitled to certain benefits, the likelihood is high that the debtor will end up in bankruptcy. Back to top 4. What Services Should You Demand of an Outside Collection Agency? There are a lot of collection agencies out there that would be happy to get your business. You might be using one or more of them now. But are they giving you the services that you deserve? Here is a list of services that top-flight agencies offer (and that you should be getting) as well as a few tips on what to watch out for. · The agency should be fully computerized and have software which gives you the information you need to measure that agency's effectiveness. Within 24 hours of receipt of a claim, an acknowledgment should be sent to you, and both written and verbal demands should be made on the debtor. Based on the results of the first debtor contact, follow-up should be made on a day-to-day basis, without harassment, to assure the greatest net return to the client. A written report should be sent to you within five working days of receipt of the claim. If urgent, a verbal report should be made with a written follow-up for the file. Within 30 days of the first report, a status and recommendation report should be sent to you. All recommendations for a payment schedule, settlement, or legal action should include a substantial amount of information about the background for the recommendation. If interest and/or attorney fees are collected, that should be reported to you, and, unless otherwise negotiated, the agency should take only their usual fee on those amounts collected. Some agencies keep it all! The agency should choose only quality, certified attorneys, negotiate the best rate for you, and provide timely reports about their activities. Unless a claim is for less than $2,000, or there are special circumstances (such as a dispute), the attorney's non-contingent suit fee should not be for more than five percent of the claim. When a legal file is closed, the agency should account for all advanced court costs. Remittances should be sent to you no later than three weeks after receipt of a payment that clears the bank. Collections via certified funds or from attorneys should be remitted within one week of receipt. It is very important to keep a close eye on accounts on which legal action is taken. Scrutinize the amount of fees paid. Sometimes an agency will keep some of the fees or costs advanced or will ask for additional fees when it knows an attorney is about to collect the account. Some otherwise reputable agencies do such things so that they can make more money or make up for giving lower fees to get the business. You can't buy a Cadillac for the price of a Chevrolet. From written reports, you should be able to track the following: how well the agency does on obtaining promissory notes and personal guarantees; post-dated checks; complete information enabling proper decisions; and resolution of disputes without legal action. An agency should also be available to give you sound advice on complicated matters, provide seminars or training to help your credit/collection departments do a better job, and give specific advice on how you can save money on collections. If you are a large user of agencies, you should consider visiting those agencies. Meet the staff to see if they are the type of people you want to represent your company. Review the agency's written collection standards. Look at the trust account. Check out the agency's software and hardware. All of this checking out and visiting is important because a collection agency acts as your agent. As a result, any action the agency takes is a reflection on your company. Many clients have been sued because of their collection agency's actions. You are also putting that agency in charge of a lot of your money. Do not rely on an agency's bond or membership in any association. It is not hard to obtain a bond, and the standards for belonging to an association are very limited and may not reflect the true nature of the agency. The agency should be able to send the client a fully computerized report on any or all claims at any given time, but not less than on a quarterly basis. This report must contain all information needed by you to analyze an agency's effectiveness. It should have a separate trust account into which all your funds are deposited and remain until they are remitted. The agency's fee should not be taken from the trust account until you are paid. Back to top To learn more about subscribing to Credit Today, check out our web site at http://www.credittoday.com/ Benchmarking Collection Agencies- Tips for Maximizing Your Relationship With Your Collection Agency *Case Studies- Cost Savings and Improved Customer Service Gained By Outsourcing the Billing Process* *Statement Processing and Distribution- Paper Predominates, but Alternative Methods Are Gaining Traction* *Can You Add a Surcharge to Credit Card Payments- No, but . . .* *Back to top*