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November 1, 2010 BCMA - It’s All About You! Welcome to the latest issue of BCMA News! This month’s topics… 1. Billing Dispute Form Corrects Invoicing Errors 2. With the economy the way it is now, are any of you now requesting security deposits from customers? 4. Generalists and Specialists 1. Billing Dispute Form Corrects Invoicing Errors Far too often the reasons for payment delays go back to the creditor's organization with incorrect invoicing. One company has put a stop to this problem with a Billing Dispute Form. Here's how it works: 1. When a customer complains about a billing error, Credit lists on the form the customer name, the invoice number(s), and the reason given for nonpayment. 2. The form is e-mailed to the billing supervisor. "What we're aiming for at this step is to get quick resolution," the credit manager explains. "We had been experiencing payment delays of as much as 90 days because of these complaints." 3. Credit analyzes and categorizes the reasons for billing mistakes as listed on the form. One thing they'll look at is whether or not the same people are making the same mistakes." 4. Corrective action is taken. "Often it's a matter of communicating these issues to billing personnel," he says. "These people may not understand why accurate document numbers, quantities of product, and pricing data is so important. Without total accuracy, many customers refuse to pay. You have to educate these employees on the importance of doing the job right the first time." ? “With the economy the way it is now, are any of you now requesting security deposits from customers? If so, do you just put a credit on their account ‘just in case’? “These types of customers, who are new to us, usually order over our initial threshold of $2,500 and have no or limited D&B information. We simply do not have enough information available to comfortably release their pending order immediately. “Obviously if they are paying by credit card we can (and will!) have the entire amount preauthorized before the order is shipped, but these are customers who are requesting other payment terms -- including COD-Cashier's Check. (We are also very careful about only accepting Postal or Bank Cashier's Checks or money orders. We're not crazy about taking them, but unfortunately sometimes we have no other choice.) “Anything you can provide me -- including suggestions -- will be very much appreciated!” - Colleen U. Jones, Credit Manager, Phillips & King International Inc. Credit Today Listserv members had a lot to say about this timely situation. = = = = = = “We do a COD$ to driver at the time of delivery until the credit app comes in with a signed personal guarantee. We only do CODCK if the banking information comes in before the order goes out and only if the account has had no NSF activity. We will also take an ACH at the time the order is processed in order to avoid any delays in shipping.” - Lupe' Maki, Credit Manager, Indianhead Foodservice Distributor = = = = = = “We have developed a one-page prepay and or COD agreement form to be completed and endorsed by the prospective customer. The language built into the form provides our company with recourse to seek collection, legal and handling costs if there is a default on the partial payment or COD terms. COD default occurs when the customer refuses to accept delivery or when the customer does not have a check available at the time of delivery.” - Warren Myers, Credit Manager, Playcore Wisconsin, Inc. = = = = = “COD shipping is a last resort for us, as it requires everything to go perfectly from the tags being securely attached to the customer having the right funds when delivered. We require a deposit 10% of order with a minimum of $100 or whatever is necessary to cover any freight. In securing the deposit we tell the customer that refused shipment will incur cost deducted from deposit. If shipment is in multiple cartons each carton is tagged for prorated amount plus COD fee. When shipment is complete and no further orders pending, the deposit is refunded. Any payment due must be received before releasing further shipments.(Several years back we had a customer who talked the shipping company into storing their shipments. Had a few shipments stacked up before we contacted the shipping company asking about the payment. Also, while we do not have a set limit on COD, I would hesitate to ship a large shipment cross country, and we never ship COD outside continental US.” - Carol Haynes, Services Manager, Credit/Accts Receivable
"We have automatic dunning cycles. We call customers, and we write to them. We try to stay on top of slow payers as much as possible. The biggest credit challenge," says Steven A. Fistel, director of credit for Trans Apparel Group (Michigan City, Ind.), "is to make good credit decisions and work as efficiently as we can to keep accounts current." To minimize risk and keep accounts current, he concentrates on: Terms and conditions. The company offers a wide variety of credit terms based on various factors including geographic area. There are no discounts. New customers submit a credit application with trade references and a bank reference. Fistel also gets as much information as possible from the sales rep that makes the sale. In addition, he asks for financial statements. "If we don't get a financial statement," he says, "we rely on the D&B report and the information we get from trade suppliers and the bank." After reviewing the credit application and checking references and other information, Fistel sometimes requires cash in advance or a personal guarantee. “Sometimes we get the guarantee and sometimes we don't. In some cases, we ask for cash in advance--most of the time for full amount. We also accept credit cards." Orders are both seasonal and on a regular basis. "Customers order seasonally for delivery during a certain portion of the year," according to Fistel. "However, before and after that, they order on a regular basis to fill their stock. We don't have any huge accounts for department stores. Your basic retail specialty store doesn't order a huge quantity that could put them behind the eight ball if they had to pay in advance." Letters and phone calls. The dunning cycle flags accounts that are one day past due. Fistel then determines which accounts will be mailed a past-due notice. Customers who normally pay on time are not sent a notice. Those who are constantly late not only get a notice, they may also be called. "The notices are in four stages, and they get a little stronger as they go along," he says. Payment arrangements. When customers are past due, Fistel tries to arrange a payment plan. For example, a customer might pay a monthly account with a credit card. "If customers cooperate, we work with them," he says. "We try to help them get through as best they can. But a lot of times, they don't respond. They don't come through and they don't make any promises so we place them for collection. After that, we would not even consider any merchandise for them until their account is cleared up. I'm not at all reluctant to lose customers. If it's not a good account, I have no problem not selling them." Deduction resolution. The company has no formal policy on deductions. Each is handled on an individual basis. When a check comes in with deductions, the credit department starts the resolution process. "With department stores," Fistel says, "it isn't credit issues that we worry about. It's deductions. They may say we sent the wrong merchandise, the packing slip wasn't enclosed, we didn't send it the right way or there are shortages--all kinds of things. "We work with other departments within the company depending on what the deduction is for. If it's an advertising or markdown allowance, we work with the sales department because they're the ones who authorized it. If it's routing, we go to traffic. If it's a shortage, we go to the claims area. It depends on what it is." "Minimizing risk and getting customers to pay on time is always a challenge," he says. "The right combination of decision-making methods and collection techniques make the process more manageable." More and more often, credit managers are expected to be both generalists and specialists. As middle managers in an era of downsizing, mergers, re-engineering and reorganizations, credit professionals have, of necessity, developed a "can-do" and a "will-do" attitude toward new assignments and responsibilities. Credit managers are becoming generalists because it is in their best interest - and in the best interest of their employer - to do so. At the same time, credit professionals cannot afford to stop learning in the specialized field of credit management or to ignore their obligation to safeguard their company's investment in its accounts receivable. Some of the additional assignments credit managers are often asked to accept include:
As a result of these new assignments, workloads are growing and credit managers are working longer hours to compensate. One of the biggest challenges credit managers face is managing new responsibilities without losing sight of their primary responsibility to manage accounts receivable. Credit managers who lose sight of this primary responsibility are unlikely to find that executive management will accept the excuse that they were distracted by extraneous assignments. Some credit managers thrive on these new challenges. They enjoy the visibility that special assignments give them and the acclaim they receive when the assignments are successfully completed. Some of the advantages of accepting new assignments include:
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