"The most important factor in good collections is knowing your customer," says one New York credit manager. "Join job-related organizations so you can network with customers. Call on customers when there's a problem. But don't wait for problems to arise--see them at other times. See how they operate. That can help you plan your approach when collection calls are necessary.

"Do everything you can to establish rapport. People tend to pay creditors they know personally and see on a regular basis because they want to keep up friendly relations."

For instance, he may call a customer and say, "Hey Jim, I don't have your check yet." The reply is usually, "Sorry, I'll get it in the mail right away. And he does."

He suggests the following steps for getting to know your customers better:

Get the name right. When calling a new account, ask for the person responsible for payment. Get the name and put it in your credit file, so future calls will be directed to the right person. "Then always ask for that person by name."

Keep records. Record the time and date of every call, along with notes on the conversation. Keep all collection files current and in alphabetical order so the information you need is always at your fingertips. "Nothing is more frustrating than talking to someone when you can't find the information they are referring to," he says. "Have purchase numbers, invoices, dates, and the name of the person who signed for or placed the original order right in front of you."

Listen and act. "Listen to what customers say," he urges. "Often, an unpaid notice is the result of a misunderstanding, and the matter can be worked out to the satisfaction of both parties. If there's a dispute, take care of it immediately. Get all the facts together and take them to people in your company who were involved in the transaction. Then call the customer promptly with your findings."

Be an organized communicator. When it comes to collections, it's important to be organized, outgoing, and communicative. Be pleasant and considerate. Have a good command of the English language, oral and written. Take the bull by the horns and make good decisions."

2. Going With Your Feelings

"I don't believe in following a straight path all the way through the woods," says Credit and Accounts Receivable Manager Peter Denyssenko of Motif Designs, Inc. (New Rochelle, New York). "I go with my feelings. I think if you're able to see each situation in individual terms you do a little bit better in the business."

And Denyssenko has done well. When he joined the wallpaper, fabric designer and manufacturer eight years ago, it had $2 million in receivables on $10 million in sales, with an average of 69 days sales outstanding. Today, DSO has been reduced more than 50%, to 34 days, and receivables average $1,800,000 on sales of $13.5 million.

Denyssenko attributes his success largely to decisions he has made when established customers strayed from regular payment patterns. The decisions--which generally involve adjusting credit terms to changing situations--allowed him to retain the customers while enabling them to continue operating profitably.

The variety of situations Denyssenko has faced is not unusual--a customer who went over his credit limit, another who stretched discount terms, a disputed bill, and inconsistent payments from a foreign customer. In response to these situations, Denyssenko has utilized a keen sensitivity to customers' payment patterns and taken a firm hand as well.

While raising a credit limit may have been a viable approach in one case, lowering back to normal when the need for the higher limit subsided is also an important step. Similarly, in another case, the credit limit for a customer who had trouble paying its bill was not lowered--but payments were required to be made more frequently.

Creative Financing
"Knowing your customers is essential if you are going to use 'creative financing' to help both them and yourself meet sales goals while staying financially solvent," he says. "I handle about 40 of our accounts myself and am on a first name basis with controllers and account supervisors at these companies. When problems arise, moreover, I will ask to speak to the company's president to resolve matters."

From this first-hand knowledge, Denyssenko is able to make well informed decisions when problems occur. Is the customer consistently forthright and honest about its solvency? Do they pay when and how they say they will, as a rule? Relying on past experience with customers is crucial to Denyssenko's decision making process.

"We have one good customer whose style is to paint a rosy picture even when there are some problems," he says. "I take a firm and cautious approach with this account, doing several credit checks per year with his bank and adjusting credit limits accordingly.

"On one occasion, when he took a discount without meeting the payment terms upon which it was granted, I took swift action, asking him for reimbursement of the difference and making it clear we would put the account on hold if he did not abide by these rules. We haven't had this problem again."

"It was far more productive both for us and for him to raise his credit limit temporarily to accommodate the new order and then to put it back to normal," he says. "In this way we continued to maintain good sales with him, and we gave his sales a boost."

Denyssenko stresses that knowing the full range of alternatives you have in typical credit situations, such as those involving foreign customers, helps you deal decisively with problems that can emerge. "While we try to make it a goal to maintain a high level of sales with customers while still applying sound credit terms," he says, "there may be situations where you have to accept somewhat lower sales in order to have a customer maintain a consistent payment pattern."

"The customer paid consistently with the different payment terms for six months to a year, then started to be behind, each time necessitating that we take a harder line. Now we're doing somewhat less business with them, but they're still a good customer of ours. We ask them to send a wire transfer in advance of shipment. Upon receipt of the funds, we ship the order. They place their next order, and the process repeats itself."

Denyssenko also advocates working closely with other decision makers within your company will help ensure that your ideas are implemented. "There may, of course, be times during which you are overruled. You can get maximum exposure for your ideas, however by asking to be included in meetings in which large deals involving new credit terms are discussed, by encouraging sales personnel to discuss credit terms with customers 'up front,' and by documenting the results of various decisions. The latter will give you statistics which you can show upper management that may support your ideas and show they do work.

"Establishing an equilibrium between sales and credit priorities is easier when you've established regular lines of communication with sales and management personnel in your company," he continues, "and documenting instances when overzealous concern for sales backfired can help you make your ideas heard the next time around. At the same time, you've got to show other company personnel you're receptive to their priorities. That's where 'creative financing' can be most effective."

Credit is often simply adhering to the basics, which is often easier said than done. Constant vigilance is always the watchword in our profession. And if you think the basics aren't important, check with bank shareholders these days.

Whether or not you're new to International credit or not, here are some words of wisdom that are worth paying attention to:

"Know your customer and country, ask lots of questions, establish good solid terms and if it doesn't look right ask for cash in advance or a standby by letter of credit to support the transaction."
- Patrick Spargur, Corp. Credit & Collections Manager, Bally Technologies

"Opening up a non-email dialogue with the customers is very helpful. Skype video calls bring that face-to-face element in as well."
- Harris Semegram, Director of Credit, Prestige Brands Holdings, Inc.

Utilize banks and other instruments of credit to manage risk and receivables. Be proactive and do not wait. Hesitation can make a huge difference from non-collection to being paid in full."
- Daryl Lawson, Billing Credit & Collections Manager, Squire Sanders & Dempsey

Look at country risk even more than individual company risk."
- James Albetta, Credit Manager, Ansell Healthcare

"Stick to reputable bank letter of credits and wire transfers. Use credit insurance if financial information is unavailable."
- Ken Zanolini, Director of Credit, F Rodgers Insulation

"However costly, get multiple reports or information."
- Andrew Keefer, Credit Manager, Orthovita, Inc.

"Don't believe everything you read. Financial information is notoriously overstated and unaudited."
- Megan Kinsler, Credit Manager, Merisant