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September 1, 2008
BCMA - It’s All About You! Welcome to the latest issue of BCMA News! 1. Can You Add a Surcharge to Credit Card Payments? No, but . . . 2. What To Do When Your Customer Pulls a Disappearing Act 3. Protection Your Credit Application Can Give You 4. Guerrilla Tactic to Stay Connected 5. Check the Quality of Software Support Before Buying 1. Can You Add a Surcharge to Credit Card Payments? No, but . . . Collecting trade payments on credit cards, especially from slow-pay or potentially no-pay customers, has obvious advantages. The obvious disadvantage, particularly for a low-margin business, is the 2.5 to 3 percent merchant account fee. So, we hear the question all the time from credit execs: "Can we charge them extra when they pay by credit card?" Except in certain instances, the answer is no, since merchant agreements, as established by MasterCard, Visa, and American Express, prohibit passing on the cost in the form of a surcharge. Despite that, we hear reports of companies passing on the costs of credit card use by varying methods, often using terms other than "surcharge" (such as "convenience charge"). A prominent creditor's attorney recently advised us that, while it may be prohibited, he's never seen any evidence of the credit card companies enforcing the provision. He's sampled a number of credit managers over the years who say they pass on the costs of credit card use in some fashion. He also advised that he has sampled some card industry executives who advised non-enforcement in this area. This makes sense given what we see at some credit conferences. Most credit conferences solicit vendors to be "sponsors" at their conferences, and the highest paying sponsors we've seen are the credit card companies. If they get a business (large or small) to use their merchant account, it can be a very lucrative contract. In fact, we've seen banks routinely pay $25,000 to have access to credit managers of large companies at credit conferences in order to solicit their merchant account business. So, based purely on the economics of these contracts, we suspect that they may be very reluctant to cut off one of those customers for trying to recoup some of the costs of offering credit cards to their customers. Are we recommending that you start passing on this cost? No. We're just passing on our observations and intelligence in this area. It's a trend that we'll continue to follow. 2. What To Do When Your Customer Pulls a Disappearing Act One of the members of Credit Today’s online forum recently reached out to fellow forum members after discovering that one of her customers had "closed it's doors," without any notice that it had filed for bankruptcy. The customer has been on CIA for several months to protect her from a preference claim. However, the inventory remaining at the customer was probably older than she could possibly want returned. So she wondered about her legal rights: If they have not filed, could her sales guys go there to see what product of hers' is still there in order to arrange a return perhaps? They still have advance monies on their account, but have cancelled the orders in house that were to be shipped for this advance payment. If they file, what will the courts say about that money? Will they make her return it? She has tried to call the principal to get an understanding of what is exactly happening, but he has not answered. Listserv members were helpful, but far from encouraging. "Your only recourses are: Skip trace them yourself; Send them to collection and see if the agency can locate the owner and/or the goods; Try to sue the owner, if they are a Sole Proprietorship or you have a personal guaranty. Outside of that, you are generally out of luck and the debtor/customer knows it. Sorry I couldn't be more optimistic." -Bob Czaplinski, Credit Manager, Simon Golub & Sons, Inc. "Does the bank have an all inclusive UCC-1 filing on the customer? Did you run a UCC lien search to determine other potential liens on assets? Does your company have a purchase money security interest in the product your customer has on hand, and is it perfected? Of course, when all else fails, possession is 99% of the law." -Jim Albert, Sr. Credit Manager, Gensco "This happens rather frequently with our small customers. Closing up saves them the expense of filing bankruptcy. If there is a bank involved, they probably have a lien on all assets and may ask for the prepayment back as part of a preference claim, unless they are whole and don't care. You can have an agency skip trace the owners to be sure they are gone and closed. If so, your inventory probably was sold at a fire sale.-Paul Ruzga, Director, Customer Financial Services, Simon and Schuster 3. Protection Your Credit Application Can Give You You should check you credit application to make sure that it is providing the protection you need from customers' stalling, dodging and just failure to pay. One application we've seen includes these provisions:
This company' application previously had included some but not all of these provisions. The credit manager reports that there has been no protest from new customers, who probably don't bother to read them anyway, but that when they have to be implemented they've been just as effective as the company had hoped. 4. Guerrilla Tactic to Stay Connected Nowadays, you can feel pretty helpless going on the road for more than a day or two and finding out that you forgot your cell phone charger. If that happens to you, check with the hotel you’re at. If it’s a fairly large hotel, chances are they’ll have a pretty good stock of cell phone chargers in their Lost & Found, and be happy to loan one to you while you’re there. It worked for us at the recent NACM Credit Congress. In fact, they apparently had so many that when we offered to bring it back when we checked out they said, “Don’t bother.” 5. Check the Quality of Software Support Before Buying If you’re thinking of buying an expensive A/R software package to help you manage your receivables, here’s an important criterion to consider. How much support will you need and how much are you REALLY going to get? How accessible is the support staff? How extensive is the software support? How responsive will the company be to your questions? Here’s a good way to check up on the various software providers when you’re in the decision-making phase. See if they have online help available. Is it easily searchable? Are the answers complete and easy to understand? Then leave a message with tech support, either by phone or by e-mail. (Think of a good hypothetical question relating to your situation.) How long does it for take them to respond? How helpful, complete and useful is the answer they provide? If the waiting time is too long or the answer is inadequate, it’s probably a precursor of things to come, and perhaps an indication that you should consider taking your business elsewhere. To learn more about subscribing to Credit Today, check out our web site at http://www.credittoday.com/ Survey Results: Telecommuting Not Gaining Traction in the Credit Community 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 |
