It’s December, the last month of the fiscal calendar for most companies. There is a lot of pressure to make sure your results are strong. The sales team wants to have as many orders as possible go out the door. You need to have as much money as possible come in but your customers are having cash flow concerns, and it’s not making your job any easier. What is a credit manager to do?
It might be easy to just say ship the material and say “Happy Holidays.” It will help increase sales and will make your past due percentage smaller and possibly improve your DSO. The orders will help your customer complete the job they are trying to finish before the holidays. Your sales manager will be happy as that will increase their bonus payout for the month, no coal in their stocking this year. You can collect those funds in January. However, is this really in the best interest of the company? Are there other options that might secure the order, entice your customer to pay you sooner or can you just bring in the cash?
In my credit experience, I have worked with a lot of contractors. We ask questions about the order and find out if this is material that is being used to improve a particular piece of property, if it is we will ask for a job sheet. With that information, we create a job account to secure our transactions either through lien or bond rights. There is a level of comfort when we have a job account: we know that if there is a payment issue, we can reach out to the owner or the general contractor for their assistance. If I am questioning if an order can go out the door, I will always ask, “Can we secure it?”
All credit professionals are trying to be paid before other suppliers. Providing excellent customer service helps as the customer is more willing to pay you first but that may not get the job done. Have you ever tried to offer a one-time discount for a large payment? Have you asked the customer if they can dip into their line of credit? In the construction industry, you can ask for a joint pay agreement, when they get paid by their customer, you’ll get paid at the same time via a two-party check. We are all leery about accepting a credit card payment, but is that an option you can offer? Being creative is a key asset to success in credit. Find a way to get the order out the door and to collect the funds.
Your goal within the credit department is to maximize sales by managing risk and minimizing write offs. This is the same throughout the year but even more important at the end of the year. So how do you make that decision to ship or not to ship? Are you going to be Santa or the Grinch? My suggestion, pull out your red bag of tools & tricks and surprise the sales team, your boss and your customer and show them that Santa does really exist and find a way to accept the order and get paid.
I wish you all the very best during the holiday season. If you have any questions or comments, please reach out to me.
Melissa Kobus, CCE, is the Credit Management Association Chairman and Regional Credit Manager for Anixter Inc., based in Anaheim, CA. She can be reached at 714-695-2219, or firstname.lastname@example.org