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, 2010 BCMA - It’s All About You! Welcome to the latest issue of BCMA News! This month’s topics… 1. Watch Out for the Premeditated Overbuy 2. The Proactive Crisis Management Drill 3. When Customers Call 4. Transferable Letter of Credit: A Smart Way to Extend Your Credit Protection Back to top 1. Watch Out for the Premeditated Overbuy It's every credit manager's nightmare - an account that appears creditworthy on paper makes a large order, accepts delivery, and then disappears without paying. It's called an "overbuy" scam, and if you've ever been on the losing end, you know how frustrating it can feel. PROTECT YOURSELF Look for the following clues during your credit investigation to help avoid getting caught in an overbuy scam. The merchandise ordered is unrelated to the purchaser's line of business. Sudden changes in product lines may indicate the need for additional information. Dubious references. All prospective customers list references they feel will give them a good review. But if you get rave reviews from listed references, while the customer's bank or other sources have virtually no information, you should raise a red flag. Inaccurate employment information. Check the employment record of the people in charge of the prospective customer. You may find that they list nonexistent or defunct businesses in their resumes. Also, look out for the person who claims to be "only an employee" when in fact he or she is the principal owner of the business. Uneven payment records. If some suppliers are paid promptly while others are left hanging, you should question the creditworthiness of the prospective customer. The company probably pays a few creditors on time so that it can be assured good references from these companies. To make certain you're getting the full picture, ask for a large number of references or pull a trade report to get information from other suppliers. Unreasonable sales practices. If the company is buying more of your product than it could possibly use or sell according to its sales figures, or if its prices are unreasonably low, take a second look. Out-of-state purchasing. If a small company in another state is ordering your product when it could get the same product locally, check the location of its other suppliers. If the company seems to be buying from different suppliers in several states, you could be looking at a scam. Month-to-month leasing. If the prospective customer only leases its building and equipment on a month-to-month basis, beware. Along with such arrangements you may find a lack of assets and a staff made up mainly of temporary employees. This could be a company set up to move out at a moment's notice. Back to top 2. The Proactive Crisis Management Drill "We practice our most frequently occurring credit snags in what we call a 'proactive crisis management drill.' I give my credit staff a hypothetical situation, they develop their individual responses, and then we meet to discuss the results. If we discover procedures that improve the company's standard approach for the scenario, the new procedure is submitted to management for approval. Here are our most critical situations and how we handle them: Returned checks. The account is placed on restriction. We take measures to secure funds within ten days of notice (in line with most bad check laws). Bulk sale transfer. The customer account is immediately restricted. Orders in-transit are delayed. We file a reclamation claim when appropriate. We contact the new owner for credit information and a complete credit application. Bankruptcy. The account is immediately restricted. In-transit orders are delayed and reclamation claims are filed when appropriate. The type of bankruptcy dictates further action. New customer with order in house that does not have complete application. We contact customer service for the requested shipping date. The customer is then contacted directly for completion of the credit application. We review this immediately to meet the requested shipping date. "By reviewing these scenarios and running mock drills, we have been able to react instinctively. This has prevented bad debt, and allows for a smooth flow of actions rather than reactions." Thanks to Ms. Bobbie Shier Back to top 3. When Customers Call Is there a lengthy and confusing telephone menu between you and your customers? If so, that could be a major sales advantage--for your competitors. Phone menus are mangling customer relations throughout the economy today, but probably nowhere is the damage greater than with those customers who are calling in to try to straighten out or get answers to credit-related issues and problems. "By the time a customer calls, the situation is already quite serious," notes Credit Manager Mike Delekta of Paramount Cards. "You can figure that if this is a problem for this customer, it is affecting other customers. So it really requires immediate attention." Delekta recommends three major steps in successfully handling customer calls: Answer promptly. Paramount Cards has a brief phone menu. Customers who do not find an appropriate listing are routed quickly to the operator. Have a "can-do, I'm-here-to-help-you" attitude. This goes for everyone in the organization who has any occasion for customer-telephone contact. "It's got to be in the tone of voice; it has to be up-tempo," he says. Consider every call a sales opportunity. "It costs far less to nurture existing customer relationships than to develop new ones," he points out. "Giving them no reason to go somewhere else is a sales responsibility we all share." The fact that so many of the customer calls coming into the credit department are prompted by problems caused elsewhere in the company strikes him as neither unfair nor unwarranted. Payment-impeding problems, no matter where they originate, are the proper concern of Credit. It is the credit staff's responsibility to resolve these problems to the complaining customer's satisfaction and to ensure that they do not happen again--to this customer or to any others. "Credit gets all the calls that fall through the cracks," he says. "We're an information resource. When you pick up the phone, you have to concentrate on listening, on getting all the facts. Nothing is trivial. If the customer has a problem, you have a problem." Most often, he continues, problems stem from some kind of processing error: a shipment went out too early, or it went out too late; there was missing paperwork; there is some misunderstanding about the contract; or something a sales representative said was unclear or misunderstood. "We have to correct these errors. We have to make certain they don't happen again, and, above all, we have to convince the customer, by what we say and how we say it, of the honesty and integrity of the organization." Calling Out The calls he and his staff make to customers, Delekta emphasizes, are business calls, not collection calls. "There's no problem we can't work through," he says. "If an account has gone past due, we'll call to see what the problem is and how we can help. Have they run into a cash-flow problem and now need an additional 60 days? We'll work with them. We're not going to put a $50 order on hold for a $10,000 a year account. "It's never so much what you say as how you say it. The better you communicate, the more you get to know your customers and the more they get to know you. Whenever we open a new account, we call the person within the customer's organization who will be handling it. We also try to get acquainted with the receptionist--the person in front of the person we need to speak with. When we do call, we don't want the reaction to be, 'Uh-oh, here he is again.'" Preparations that the Paramount staff went through recently for one new account are typical. A meeting was held among all of the functional areas that would be involved in servicing this account. These included Customer Service, Sales Administration, Manufacturing, Contract Administration, Accounting and Credit. They reviewed the requirements of the contract, verified the ship dates, and e-mailed the key contact in each functional area to the customer. "Preparation, thoroughness, and attention to detail are the key elements in ensuring success," says Delekta. "The timely handling of the initial shipment, especially in the case of shipments to multiple locations, sets the necessary tone and expectation level to the customer. We successfully fulfilled all of the requirements and received the customer's congratulations for 'a job well done.' "Remember, you never get a second chance to make a first impression." Back to top 4. Transferable Letter of Credit: A Smart Way to Extend Your Credit Protection In international transactions, a letter of credit issued in your favor by your buyer's bank is one of the best ways to get paid quickly and surely. It provides you with credit protection and allows you to get paid locally--by your own bank-- although your client may be overseas. What you may not know is that the letter of credit can get even better. It can allow you to extend your credit to your supplier, if you get a transferable letter of credit. Kim Lester, trade service officer at Fleet Bank (Boston), explains the key points of a typical transferable letter of credit, and how to avoid many of the pitfalls that are common occurrences in handling transferable letters of credit. How It Works "If you receive a letter of credit in your favor but you are not the manufacturer of the goods," says Lester, "you must first purchase the goods from a third party or a supplier. However, the supplier will want some type of protection that it will get paid. You have three options: Use your own funds to purchase the goods. Utilize your credit line to arrange for a letter of credit to be issued in your favor. Transfer your rights--either in full or in part--under your existing letter of credit to your supplier under a transferrable letter of credit. "A transferable letter of credit has many advantages," says Lester. "It allows you to extend credit to your buyer without tying up your most valuable resource--your own credit line. You are essentially using the credibility of the issuing bank. It allows you to get paid quicker." But in order to successfully complete the transaction, here are some of the key points to keep in mind. Begin at the Beginning As soon as you receive the letter of credit, make sure it allows you to transfer the credit. Under UCP 500 (Uniform Customs and Practice), all letters of credit are not transferable. Therefore, unless this provision is specifically mentioned, you will not be able to transfer the credit to your buyer. Examine Your Letter of Credit Read the letter of credit very carefully. As you may have heard thousands of times, banks only deal in documents, not in goods. Make sure the invoice asks for the description that you can submit. Keep in mind that you are allowed to replace only two documents; namely, invoice and draft. Find out what kind of shipping document is required and whether the supplier can produce the right one. "If there are other concerns, your bank is a great resource," says Lester. "Talk to your banker, but keep in mind that you should do your homework in choosing your supplier. "Under a transferable letter of credit, the beneficiary is totally at the mercy of the supplier. So knowing who you are dealing with is of utmost importance." Act Swiftly "In a transferable letter of credit, time is of the essence, since you need additional processing time," Lester says. "The process includes the second beneficiary presenting documents to its bank, who then sends the documents to the transferring bank, which is often in a different country." Prepare your documents so that you can make presentation as soon as the documents from your supplier have arrived. Amendments "As a first beneficiary, you have two options. You can either allow for the automatic transfer of amendments or keep the right to refuse the amendment before it gets transferred," says Lester. Regardless of which option you choose, the UCP 500 requires the transferring bank to convey the decision to the second beneficiary. "In the interest of the beneficiary," says Lester, "I suggest that they always refuse to allow for the automatic transfer of amendments. This will allow them to maintain control over the requirements in the letter of credit." Protecting Identity Although you are essentially passing on the same papers--except the invoice and draft--it is possible to protect the identity of your supplier or your buyer under a transferable letter of credit. However, you must be careful. "As soon as you know that you will be the beneficiary of a transferable letter of credit, contact your bank to find out how you can structure the letter of credit to protect all necessary parties and eliminate potential pitfalls," says Lester. "For example, if you do not want to expose the name of the buyer to the supplier, make sure that the transport document is cosigned to the bank or freight forwarder." Although a transferable letter of credit is a very useful instrument and will work in most transactions, you should keep in mind that there are some instances when it just would not work. "For example, if your supplier wants to be paid up front," notes Lester, "a transferred letter of credit is not a good idea, since it will allow payment only after shipment is made and not before." The goods news is that once you master the ways a transferable letter of credit works, you can reap a bundle of benefits by using it to your advantage. Back to top To learn more about subscribing to Credit Today, check out our web site at http://www.credittoday.com/ Survey Results- The Battle For Financial Statement Information Staff Benchmarking Survey- Three of Four Credit Departments Are Satisfied With Staffing Levels Benchmarking Survey- Outsourcing Acceptance Grows Among Users- Part 1 Benchmarking Survey- Outsourcing Acceptance Grows Among Users- Part 2 Checklist- Major Online Seller's Top Seven Risk Factors of Fraud For Web-based Orders