Credit Extension: Thinking About Your Customer as an Investment

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“As a credit manager, every time I get a credit application I look at it as if it were an investment in stocks,” says an innovative credit manager we spoke with. Credit extension is an investment by your company in somebody, he points out, so he looks at it as if the question were, “‘Would I put money into this?’ Because that’s exactly what we’re doing when we extend credit.”

“I believe a lot of it is intuitive. You look into all the variables. If the guy’s got personal debts of $50,000 a month and the only income he has is a yogurt shop, am I going to dump $50,000 worth of product into his place? That’s an example of the basic type of thing I look at, but the intuitive factor also goes beyond the basics. “When you hardly have anything come back on you (in terms of bad debts) as credit manager, you know you’re doing it right. So after a while you just take a look at each situation and go for it if it feels right. That’s how your receivables will stay low, if you look closely at all your accounts before the fact.

Now, it’s important to note that here at Credit Today, we’re big believers in data. But two points: One, you can’t always get data. And two, common sense is always a critical part of good credit decisions.

“If you make good investments in your customers, if you go with the right ones and nurture them along, it will work out–especially if you have the cooperation of Sales and you can tell Sales, ‘Don’t load the customer up. Don’t give the guy 50 pallets of product if he’s just opened. Don’t saddle him with that debt.’ It’s just common sense.

“You can’t learn common sense. But you can make a decision to commit to the job. When you’re in there, you’ve got to give 110 percent.”

Thanks to Credit Today’s “Tip of the Week.”


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