What prompt do you put on your Past Due invoices to customers?

Final Demand
Final Demand

CMA Poll Results:

  • Stamp “Past Due” 25% 81 votes
  • Second Reminder or Second Notice 14% 47 votes
  • Hand write a note 13% 42 votes
  • We do not send second copies of invoices 28% 91 votes
  • Other 21% 68 votes

Comments:

mary Raynoha
We have the sales person contact past due customer within 5 days of becomming past due. This seems to work good for us as the sales person usually has a relationship with customers. I only contract if they cannot collect

Fay D’Amico
We have moved in a paperless direction so we not longer mail out statements, invoices or correspondence it is all done via e-mail.

Linda Reynaga
We either call, e-mail or send a past due letter at 45 days and follow up with a call in 1 week. If no response we send a statement with a “past due” stamp at 60 days. Of course, if an order is placed we hold util payment secured.

Barbara Giras
We too try to be proactive. We contact the account at 45 days. Send copies, POD’s etc as needed.

Linda Olsen
We do not sent out copies, nor do we send out statements. We try to be a proactive as we can up front. If an account goes beyond terms, we start contacting the account, the sales team and the GC.

Manny Geronimo
I do all of the above…if necessary. Certain customers require a call, but mostly I get paid as long as I knock on their door one way or another.

Jaime Figueroa
We send e-mails with copies of invoices, POD’s and any supporting documentation as needed. CREDIT HOLD on new orders pays hugh for remit resolution.

Maya deBourguignon
We send a past due letter & current statement or aging report when invoices reach 15+ days past due requesting pmt ASAP

Raj Prasad
For customers who are always paying late, we also notify them with a “Credit Hold” prompt.

CMA Poll – Have you ever had a customer cross out Terms & Conditions on your credit application?

Now this is overkill!
Now this is overkill!

Have you ever had a customer cross out Terms & Conditions on your credit application?

  • Tammy Adams  Incomplete, unsigned or altered Credit Applications are not accepted for consideration of open account terms. This information is clearly communicated at the time a Credit Application is emailed, faxed or personally handed to a ‘prospective’ new account.
  • John Lysdahl  We do not accept a credit application that has any such type of change made by the customer (potential customer).
  • Mike Puccinelli  Every customer signs a MSA contract and all Ts and Cs Re in the contract. No business can be conducted without a signed contract and signed sales orders.
  • Yvonne G. Our credit application is written and reviewed by our legal dept thus allowing any changes to the terms and conditions will undermines the intent of the credit application which is to protect the company. The only change or cross outs we allow and its on a case by case basis is the personal guarantee. Otherwise the customer is advised the cross outs and/or changes to the verbage is not acceptable.
  • Nina There is no such thing as a one-size-fits-all contract, so we’re willing to take a look at the changes they request. We’ll review the changes, and decide whether we’re willing to accept the adjusted risk. Most of the time, we won’t lend on the altered terms and contact the customer to let them know we can’t lend to them under those terms. That usually opens up the discussion to where we either come to a mutually acceptable agreement, or they decide to do business with us on a COD account instead.
  • Robert Simmons On the rare occasion a customer has elected to dictate our terms and/or conditions of sale by crossing out or changing the wording, I have advised sales the credit application is unacceptable and will be unable to establish an account. Credit would need a new application, unchanged, to restart the process. Very few resubmit a unchanged credit application. Only once has management over written my position and after a couple of years with this customer, management finally understood why I took the position I took and wrote off a 5 figure dispute, partly based on the changes in the credit application. Expensive lesson.
  • DMarc We review this carefully and there are only a few items we will allow to be crossed off, otherwise we view it as a possible red flag about the future relationship. If they cross off important items we don’t set up an individual account for them, they can purchase on the generic cash/credit card account & be taxed instead. Sr Mgmt can make a business decision to allow an override on the important items but they rarely make an exception. Would a bank or finance company allow it…
  • Dianne Talbert In addition to crossing out the terms the Credit App will not be signed.
  • Tina Smith  When this does occur, it is best to contact the customer to discuss. Even for minor issues, this helps to build a good relationship and to avoid any future mis-communication.
  • Donna Sweet  We do not accept altered terms and conditions. President/Owner will sometimes accept as a business decision.
  • Julie Ramos I would love to see those same companies try and cross out sections on their credit cards terms.
  • Theresa Golden You can live with some modifications, but there are a few (like modified terms) that you cannot accept.
  • Matt Johnston  We understand that some items can be struck from the application, however some simply cannot.
  • Ron Childs There are a few T&C that we can live without but there are some that will prevent approval of an open account

CMA Poll Results – Cash Application

Where does your cash application role fall within your company?

  • Accounts Receivable   69%  173 votes
  • Accounts Payable 3% 7 votes
  • Accounting 13% 34 votes
  • Finance 5% 13 votes
  • Customer Service 3% 8 votes
  • Treasury 1% 3 votes
  • Outsourced 2% 4 votes
  • Other 4% 10 votes
252 Total Votes
Comments
  • David Ingham – It is not proper Accounting and Audit Procedures for a Credit Manager to handle cash or cash application. Credit and Cash Application should be separate functions to avoid the possibility for fraud or misappropriation of cash receipts.
  • Tracey Beylerian –  Cash posting is part of the Credit & A/R function

CMA Poll Results – Small Claims Court

CMA Member Poll: Have you personally used the Small Claims Court to help collect past due accounts? (248 responses)

  • Yes I have used the Small Claims Court: 40%
  • I have not personally, but our company does: 12%
  • No I have not: 47%
  • Other: 1%

You can participate in CMA’s monthly polls on CreditManagementAssociation.org

Poll Comments:

Sherry Raoso
I would rather just turn it over to CMA to get collected instead of using Small Claims.

Annette Morris
Yes, I have used small claims court many times but mainly for collection of NSF checks that I could not get the customer to pay up front. I use a NSF check letter that is sent out by way of certified mail for verification that the customer has been contacted which also proves to the court that they have been notified.
All such cases have been won with payment in full by customer……

Ray Ballard
When all else fails, small claims court is an option. I can’t remember the exact cost in CA, but it was less than $100.00 to file a claim. If the defendant doesn’t show, and you win your case you will still have to collect. I saw a few comments stating on this board stating how difficult it is to collect, but I disagree.

After you win your case there are a couple highly effective legal ways to collect. You can file a request to value the defendant’s assets. This requires the defendant to show up at court and divulge all of their assets. If they fail to comply with this request, a warrant for their arrest can be issued if you choose to do so for an additional $50.00. Once they are in custody the judge can force them to disclose their assets and place a lien on those assets until their debt is paid. This will also prevent them from being able to sell their assets until their debt to you has been paid.
Another option (in CA) is to have the sheriff’s department do a Till Tap. This is where the sheriff goes into the business and takes money to pay your judgment from a cash register.

I’ve found that judgment debtors tend to ignore all court orders until the day before the warrant is issued for their arrest…then they call and beg to settle.
Good Luck

Ken Zanolini,CCE,MBA
If at all possible settle, negotiate or compromise before going court!
The legal process is time & cost consuming.
However, it is a highly effective way of getting a judgment on the debtor that they can only escaped from by filing Bankruptcy! Remember, judgements are sometimes worthless.
Thanks & Good Luck!

Manuel Gonzales
We have used Small Claims Courts a few times in the last year alone and have had good success in either being paid prior to the court date or getting a default judgement due to the defendant being a no-show.

Tina Langan
I would love to use the the small claims process. Perhaps CMA could put on a webinar or seminar on it? I would love to attend.

Penny Blount
I handle the Small Claims in Las Vegas Nevada for all of our members that have Vegas accounts and I have only lost 1 in 5 years it is a good way to collect but it is time consuming. I am not sure where the person that made the comment about you have to have an attorney to handle this is you are a corp. but that is not the case. Please see (NRS 73.012 Representation of nongovernmental legal or commercial entity by its director, officer or employee. A corporation, partnership, business trust, estate, trust, association or any other nongovernmental legal or commercial entity may be represented by its director, officer or employee in an action mentioned or covered by this chapter.) Please keep in mind this is for Nevada.

F. Scott Wilson
Small Claims Court is an *excellent* way to speed up judgment and collections for small amounts. I have personally won about forty cases, all of the ones an old employer had me pursue this way. All of these cases were business to business, with about half of them against sole proprietors.
The use of an attorney is specifically and expressly not permitted by Small Claims statutes, at least in California. This is to discourage endless litigation on small matters, and to let the judge hear the matter and decide swiftly.

As far as collecting on a Small Claims judgment goes, this can be done with some care and forethought. NOLO Press has some excellent books on Small Claims procedures, including steps you can take to make good on the judgment. I have successfully collected judgments from Small Claims matters in all but one of the above forty instances, and that was because the owner (sole proprietorship) had died between the case being heard and our receiving the judgment.

Scott
The only problem is if you are a corp., technically you must have a Lawyer represent you. Then if or when you do win, try and collect…. The system is structured for degenerates and crooks, not honest people.

Cliff Nehamen
Yes, I use Small Claims, matter of fact just returned from a case on a STOP PAYMENT check. Defendant showed and arrangements were made to resolve check; including filing fees and processor fees.

Deb
I have about 50/50 luck in having defendants show up and/or settle vs no show. It’s a simple process to rubber stamp the default and as I’m dealing in construction, that gives me the avenue to attach their contractors license bond.
The one major flaw is in B to B situations, there is the cap on how many actions that can be brought annually at the $5k limit so use your quota judiciously. It may be a wiser course to drop a moderate claim amount down below the $2500. limit (unlimited for B to B).

Alan Greenberg
I would say usually the defendant try to settle it on the steps of the court house, or they do not show up.

CMA Poll Results – Credit Applications

Do you offer to send credit applications to all new accounts? 

  • Yes, all new accounts are supplied with credit applications 81%
  • No, just those who will buy enough to need credit 11%
  • Other 8%

F. Scott Wilson

If someone comes in for a small amount of product, then they can pay COD. If they buy any larger amounts, all are required to have an application on file, even if they’re COD. The idea is that if we sell something and they bounce a check or something else goes wrong, we want to know who and where they are, and who we can pursue for payment if needed.

  • Kelly 

    We require an application IF the customer is requesting billing terms. However, our customer service department completes a new customer form with the customer if they are phoning in a new order and it is the first time they have ever purchased from us. Note: The entire application process is currently under review with possible updates in the future.

  • Melissa Kobus 

    We require signed terms & conditions on all accounts. The credit application is only required for those accounts requesting open terms. The app includes the T&C’s. We have seperate T&C’s document for COD, credit card, etc accounts.

  • Jeff Childress 

    Customers who want N30 request applications from us. We do not send them out on every new customer. Some customers like to pay cash and I would prefer not talking them into a N30 account

  • Laurel Matthews 

    We we require a credit application from all new customers. If they chose to fully prepay their first order we sometimes forgo the credit application.

  • Debra Davis 

    Our customers are required to complete our Credit Application or our COD Sheet before we will proceed in opening a customer number for them.

  • Deb 

    The application precedes an account in all instances.

  • Arrel E Tucker 

    I want apps on every new acocunt. Sometimes I get overruled by the owner but not very often.

Is your Credit Department still sending and receiving faxes?

Poll Results
7 COMMENTS
  • Stella Chavez – Scanned to email most of my correspondence
  • Gay Bramer – If we had a scanner (which we’ve begged for), I would rarely use the fax machine and rely solely on e-mail.
  • Irene  – Most requests for credit references are faxed but other credit issues are emailed and sometimes (rarely) by phone.

  • John Goss – Typically trade reference sending and receiving is all I use the fax machine for. Scanning and e-mailing the same data reduces resources and provides a great electronic copy.

  • Cindy Garcia – We still use fax on releases and credit applications, we have seen an increase in emails but fax is still the main communication choice.

    Ken – Fax usage should cease to exist in 3 more years once email/scaning has fully saturated society. It usually takes 10 years for a product to be used by the masses in their daily routine. Smart phones are the future!

  • Arrel Tucker – I mainly use faxing for getting and giving trade credit references. Most other correspondence is done via email or phone.

CMA Poll: Your thoughts on internal credit scoring systems

CMA Member Poll: Your thoughts on internal credit scoring systems. (148 responses)

  • • We use one and it is essential  15%
  • • We use one and it is helpful  18%
  • • We use one and it is inconsistent  4%
  • • We do NOT use one but would like to 14%
  • We do NOT use one and have no plans to 44% 
  • • Other:  5%

Jeffrey McLellan – We have developed our own credit worksheet that has become invaluable in approving credit and establishing credit limits for our new accounts. It is also a tool that is easy to understand for our sales staff as they analyze why/how we come up with credit decisions.

F. Scott Wilson – We use Equifax credit scoring and reports. With the size of our company and the number of different regions and businesses we sell into, creating a credit scoring system internally isn’t going to be as effective, and would chew up a lot of time and other scarce resources. I have set up credit scoring systems at other companies to good result, but it just isn’t a fit here.

You can participate in CMA’s monthly polls on CreditManagementAssociation.org.

CMA Poll Results – Last Update to Your Credit Application

When was your company’s Credit Application Form last updated?
(218 responses)

  • • Within the last year  30.73%
  • • Over 1 year less than 3 years ago  33.03%
  • • Over 3 years less than 5 years ago  13.3%
  • • Over 5 years ago  11.01%
  • • To my knowledge it has not been updated  5.05%
  • • We review and update our credit application every year  2.75%
  • • We review and update our credit application when laws change  2.29%
  • • Other: View  1.83%

CMA Poll Results – How Many Years In Business Credit?

Click to Enlarge

With 424 responses this months CMA Poll has the highest response rate and comment rate of any poll we have published. 53% of the respondents have been in business credit over 20 years.

How many years have you been in business credit?

  • Almost 2 years 2% 10 votes
  • 2 plus to 5 years 6% 25 votes
  • 5 plus to 12 years 15% 64 votes
  • 12 plus to 20 years 23% 98 votes
  • 20 plus to 30 years 33% 140 votes
  • 30 plus years 20% 83 votes
  • Other 1% 4 votes

Poll Comments

  • Thomas – 4 weeks ago

     lmao, Not too many old Credit Managers.

  • F. Scott Wilson – 4 weeks agoThis is interesting. Nearly two-thirds of the respondents so far have more than twenty years’ experience in credit, and a scant 5% have five or fewer years under their belts. It sounds like our profession could use some active recruitment of beginners, who will eventually get the experience to follow in our footsteps. Twenty years of experience, assuming you didn’t get into credit right after high school, is right around the mid-point of a career, just about halfway to retirement, and it looks like there isn’t a lot of bench behind us….

  • Deb – 4 weeks ago

    Thomas, Thomas, Thomas…that’s because only the good die young! I agree with F. Scott Wilson though. It’s an unusual bred who can be successful long term here at least with construction credit as the burnout rate with the last couple of years is pretty high! I’m always encouraging my folks to attend the seminars and/or webinars (or any other ‘inars ) 🙂 as well as take some business law classes if they don’t have that as part of their education. You can not be too well informed and today’s successful credit manager has to be a coach for their customer base as well. The better informed and educated we can make our customers, the smoother our job becomes.

  • Will – 4 weeks ago

    Very interesting indeed .. wondering what the results will be for years of service with the current employer.

  • Lee Clutter, CBA – 2 weeks ago

    I have been in the Credit Biz for 34 years. Very few of us dreamed of becoming a Credit Professional when we started working. Our unique characteristics (both +and -), our business ethics and our ability to work with all sorts of people resulted in a “win-win” for Sales and “on time cash” for the Company (collection efforts/DSO/Percentage Current).

    Will, I have been at SMART for 7 years.

  • Jackie – 2 weeks ago

    Never thought I would be in credit and here I am 8 years later. I am still happy with this field and starting my further education so I can continue in this field

  • Paul – 2 weeks ago

    I think the poll didn’t reach enough people doing actual collections, AR and credit analysis. My guess is that mostly managers received the poll, which skews the results. I have 30+ years experience and 13 with my current company.

  • jules – 2 weeks ago

    I have been in credit for 30 years and I love it. I have been with the same employer as well. Times have changed, technology has gotten better every year, and it makes our jobs so much easier these days. It sure beats the old days, we used to add up a green bar report to get a total past due list then type it on a typewriter.
    Never a dull moment, and I have the best staff anyone could ask for. I am a lucky dog.

  • Dina Amadril – 2 weeks ago

    Hi Paul – We sent this poll to all users on anscers.com which generally includes more than the manager at the company.

    Not all CMA members have multiple users on anscers so we are going to have a skew in the results anyway – but the way we see them coming in there are not too many new (under 5 years) to credit.

  • Ralph – 2 weeks ago

    I find that there aren’t as many opportunities in Credit & Collections as in the past. Technology most likely plays a roll as it allows each of us to do more than in the past. My own experience is that our profession is not as valued or respected as it was in the past. Protecting assets and reducing losses isn’t as important as posting revenue at any cost and rationalizing the losses. This is the same mindset that caused the housing debacle and has led to the current state of the economy… And it doesn’t appear that any lessons have been learned!

  • Roy K. Carpenter – 2 weeks ago

    Looks like it’s time to start hiring again.

  • Steve S – 2 weeks ago

    I’m not jumping to the conclusion that not many new people are in credit based on this survey. It may suggest not many new managers as these emails typically go to a select/narrow view which are primarily managers and manager in most fields typically require experience.

  • Brenda H. – 2 weeks ago

    I agree with Ralph, I have a GM who won’t write off debt that is even 5 years old. I guess he wants the company to keep paying taxes on revenue that we will never collect. I have been in collections for 19 years and I have never worked for a company who won’t write off debt that you have exausted all sorces to locate people and companies that have gone out of business and / or you can not locate. It is fustrating and rediculas, but I can’t get him to change his mind…

     

Enhanced by Zemanta

CMA Poll Results – Business Credit Reports

CMA Member Poll: Your thoughts on business credit reports? (463 responses)

  • They are a valuable resource 18%
  • They are necessary but not always valuable 17%
  • They are not a valuable resource 1%
  • We carry a contract for reports 17%
  • We order reports as we need them 19%
  • We use more than one brand (D&B, Experian, Equifax etc.) of report 17%
  • We use only one brand of report 9%
Other comments:
“more valuable for private companies”
“Wish more companies would report more accts.”
“We find that D&B reports are totally outdated and wrong information. We belong to a local credit group which is very helpful.”
“We rely on our on trade data reports”
“We don’t use them hardly at all but probably should”

 

 

 

 

 

Enhanced by Zemanta

CMA Poll Results – When do you send to collections?

The results of the June 2011 CMA Poll regarding Collections are in. We had 436 total votes.

When do you consider sending a customer to collections? (check all that apply)

  • 37% – When they stop communicating with me.
  • 23% – When they are WAY beyond the term granted.
  • 20% – When they have broken promises.
  • 13% – When they are paying other but not my company.
  • 5% – Other
  • 2% – When they are just beyond the terms granted.

In the other responses there were many write-ins for all of the above and a combination of reasons.

2 comments were made on the survey:

  • Lorna O’Cana  We always manage to collect our debts, unless the customer files for bankruptcy protection.

  • Elva Lopez – 5 weeks ago We send out a final notice prior to sending to collections.

CMA Poll Results – Finance Charges

Does your company apply finance charges to customer balances?

  • No 44% 118 votes
  • Yes 46% 123 votes
  • We did and then discontinued 4% 10 votes
  • We are considering it 2% 6 votes
  • Other 5% 13 votes

Rajesh Prasad, CBA – It is not a good practice to apply finance charges to customer balances. Some customers come back and request refunds months later. We notify them if we are to apply any credit balance to the open or remaining balance.

Debbie Williams – We add sevice charges to their account monthly if they account is past due. We offer to negotiate the fees when the accounts becomes current. Usually we will split service charges 50/50 for good accounts.

D Marc – Yes, our customer agreement has a provision for service charges and the system automatically applies them after a certain grace period. It’s not right to penalize our good customers by raising pricing so we can cover the additional financing costs of delinquent ones and some of our divisions have very slim margins. If we had no intention of collecting service charges, we wouldn’t bill them. We do consider adjusting if it’s a 1x situation and we will occasionally negotiate a split but we try not to be discriminatory.

Steve Gardner – We apply finance charges to every overdue account and use it to encourage faster payback and use the fees to negotiate a final payment. If it is not forgiven, then we use it in the total when we turn it over for collection to get a higher payment that offsets the collection fees.

F. Scott Wilson – We are reinstituting finance charges for some of our customers. One of our companies uses a different software, so any products purchased from that company are not accruing finance charges; the rest are. We decided to do this because it costs *us* money to cover debts held for a long time beyond terms. If we don’t charge interest, there is little incentive for anyone to make sure they pay us sooner, rather than later.

Who does your credit department report to? Poll

The results of this months member poll where not all that different than expected. 65% of the 247 members answering report to Finance/Accounting. Click the image below to see the full results.

Click to enlarge

Close to 16% wrote in an “Other” answer and most of the write-ins were Finance related (Treasury, CFO, Controller).

Over 13% of members report directly to the CEO. These could be smaller companies or CEO’s that know credits’ effect on making the cash “flow”.

Thanks to all who answered the April poll.

CMA Member Poll: Sales and Collections

The results and feedback from our March Poll are in:

CMA Member Poll: Does your company policy require Sales to participate in collections? (257 responses)

  • • 53%  Yes, Sales is required to participate in collection
  • • 33%  No, Sales is not required to participate in collection
  • • 13% Other answer…
  • • 1%  We are considering making it policy

The following comments were submitted:

David Vaiz
Most of the issues that need resolution, require buyer’s approval. Our customer’s A/P dept. is unable to make the call, they need approval from the buying department. Therefore, the Sales Rep is our connection with the buyer. We rely on them to help us collect.
Michelle Mooney
It is not a company policy but a good business practice. Many times the Sales Rep has an inside track that can push an invoice to get paid if it needs special approvals.

Raj Prasad, CBA
No, we do not require our sales to collect or pick up checks etc, however, when customers stop responding, we reach out to our sales force to help with collections. They give us a better insight about the company and verify if they are facing cash flow issues.

F. Scott Wilson
Sales has been an invaluable partner in our credit and collections efforts. We work closely with the sales reps and VPs, and inform them of major decisions that are in the offing for their customers. We don’t ask for their *approval*, but we make sure that no-one is blind-sided by a Credit decision, be it Sales, the customer, or the plant. Often, Sales is able to find people who can champion our getting paid, and help us overcome A/P’s reluctance to let our money go out the door. It’s not so much a mandated requirement as recognition that if Sales and Credit are on the same page, our customers tend to be more current and better customers.

Cliff Nehamen
We work close with our sales department. The majority of the account managers in sales have a difficult time wearing two hats; sales / collections. Every monday each account manager receives in their e-mail an aging of all accounts in their territory. Surprise, many have no clue what to do with it. By sending this each week, there should be no surprise when an account becomes past due and goes on “credit hold.” Placing an account and “credit hold” normally captures the account managers attention.

Lisa Woods
We work closely with Sales whenever there is a problem and/or billing issues. Often times we are stopped by the gatekeeper when trying to collect on past due invoices so we will ask our sales team to reach out to their contacts. Maintaining a good relationship with Sales is key to the success of any credit department and goes a long way in ultimately reaching the goal which is to have good paying, repeat customers.

Alvin Valle
You have to make the Sales People aware that no sale is a good sale until the Company is paid. In this current economy the you have to make sure that the Sales People are made aware of their responsibility to get involved in collection and write them up if they violate policies.

Arlene Aquino
We have a close relationship with our Sales Dept. We notify the Sales rep of the past due account and keep him updated on the status until it is paid. When the past due balance reaches 60+ days, the VP of sales is also notified. Our Sales Dept doesn’t want any surprises. They want to know the problem as soon as it happens, so they could provide any assistance needed to resolve it right away.

D Marcroft
If it is a dispute (ie pricing, freight, damage etc) the appropriate Sales rep or dept is notified immediately to resolve it.As far as collections, it depends on the division and the sales rep. Some of our Sales reps are excellent partners helping to get issues resolved quickly, others not so much. They all have access to aging reports (on demand) and some of them choose to stay well informed, others not so much.When an account gets put on hard hold I try emailing the rep so they aren’t blindsided (unless it’s a chronic problem account), I also inform them immediately of any nsf’s. When accounts age into 60-90 days my collectors must attempt to involve the rep in the resolution process. When they age into 91+ days, I attempt to bring the Division Manager into the process so they can determine if they will instruct the rep to pursue it.

Patricia Arias
Not a policy of ours,however, we do work closely with our sales group and will reach out to the them to help collect before taking legal action if needed.

Thanks to everyone for their participation.

 

Should Sales Help in Collections?

by: Michael C. Dennis

This was the question asked in a poll sent recently to CMA members.   In my opinion, the answer to this question is:  It Depends.  If the question was:  “Can the sales department help the credit department in its collection efforts?” I would have answered absolutely.   It depends on the kind of help the sales department is providing.   I believe the following to be true about the role of the sales department in supporting the credit department’s collection efforts:

1. If sales is involved, their role must be clearly defined in advance and ideally in writing
2. Sales should not be given authority to negotiate any extended payment terms agreement on behalf of the credit department
3. In addition, the sales department should be told never make commitments on behalf of the credit department such as this:  “If you pay the past due balance this week, we will release the orders pending and then we can go back to business as usual.”
4. The primary role of the sales department should be to convince the customer that the collection problem is serious and requires the debtor company’s immediate attention
5. The sales department should be involved in opening a “second front”  meaning that the salesperson can use their close working relationship with purchasing to put pressure on the debtor company for payment while the credit department pressures the A/P or finance department for payment, and
6. If there are legitimate disputes, the salesperson can gather the relevant supporting documentation or put their right individuals in touch with each other.

    Michael C. Dennis is the author of several books including “Credit and Collection Handbook.”  He can be reached by e-mail at:  michaelcolindennis@gmail.com

    Your Thoughts on 2010 Write-Offs (Poll)

    Poll Results - Click to Enlarge

    Our poll for February 2011 regarding 2010 write-offs received 263 replies. Participants did not submit any comments to this poll as they have for previous polls.

    Overall the news was very good with 43% reporting write-offs that were less than expected and 33% as expected.

    10% of the respondents have not yet ended their fiscal year. 13% had more than the expected write-offs, in this unpredictable economy that is a pretty good number.

    Your Thoughts on Bank References

    Small bank vault or strongroom from 1901.
    Image via Wikipedia
    CMA Member Poll: Thoughts on bank references when opening accounts. (376 responses) – Link to Poll
    26% Bank references are good to have but not necessary
    23% We request bank references
    22% Bank references are essential
    19% We do NOT request bank references
    6% Other
    4% Bank references are not necessary
    Comments entered:
    Jill Escoto
    We request bank references, but the majority of the time; do not receive a response.
    Susan La Morte
    We only request a bank reference for customers needing a high credit limit.
    Michelle Homan
    the problem we run into w/ bank references is the response time if any at all takes 1-3 weeks. which at a tight quarter end close is unacceptable. then you have the institutes which most of them are turning to or starting now is to charge a fee $15-$25 to make 3 check marks and a signature and still take 1-3 weeks to respond. this is the least preferred method for us but we have to offer it as an option.
    Christine McKenzie
    We request a bank reference, but most banks are unwilling to share information.
    Arlene Aquino
    We request bank reference, but rarely gets a response.
    Jane Smith
    We always request a reference from the bank. However, we rarely receive sufficient information, if at all.
    Rajesh Prasad, CBA
    Bank References are important to see how long they have been in business as well as identifying essential data such as their revolving credit lines and if they have had any NSF. Banks will require valid signatures that match their files and they will provide the information you need. Once your customer authorizes the release of information, the banks will furnish what you requested. I always call the bank officer before requesting information. By doing so, they usually respond. Hope this helps. Raj
    Dorella Beggs
    Some banks give limited information, some don’t reply at all, and others want you to pay for the information.
    The information is nice to have but not necessary, unless that’s the only reference provided.
    F. Scott Wilson
    Bank references are inconsistent. We can usually get this information in a credit report for most of our customers. As far as NSF’s and other derogatory data, banks don’t always release that to requestors, and at the same time don’t say whether they do or not. That means that significant derogatory information may not be revealed, or even acknowledged to exist, negating much of the reason for checking those references.
    The biggest problem for me is I don’t *trust* bank ratings, at least not without additional independent information that improves my comfort level with the bank. We flat out don’t request them if there is any fee involved.
    Natacha Navarro
    We request refs too from the bank but majority of the time don’t receive them back. You would think in this time of unstable credit that the banking facilities would be more helpful/forthcoming with this information. We operate on a credit line ourselves that is tied to our A/R and the bank audits us once a year, this would help us make better decisions on new accts. It would especially be helpful if they shared derogatory info like NSF’s or if an existing credit line had been suspended.
    Enhanced by Zemanta

    Your thoughts on lock-boxes

    CMA Member Poll: Your thoughts on lock-boxes (354 responses)

    • • 29% More good than bad
    • • 28% We do not use a lock-box
    • • 28% Can’t do without a lock-box
    • • 6% Wish we did not use a lock-box
    • • 5% More bad than good
    • • 4% Other answer

    6 Comments on the survey:

    With lockbox, customer payments are credited to our account the same day the bank receives the check. Having a lockbox also saves time because it eliminates the trip to the bank to deposit customer payments.
    Posted by Arlene Aquino on November 1st 2010, 10:46pm

    We are directing our customers to send all payments to our lock box. If invoices are matched with the correct amount, all items are applied automatically. Problems arise when short payments are made. Research has to be done and applied inhouse. All unapplied deposits have to be researched and applied accordingly. Biggest advantage of the lock box is that the dollars hit our account immediately.
    Posted by Raj Prasad on November 1st 2010, 11:37pm

    Having a lockbox saves time, money, and natural resources. First, I don’t have to visit the Post Office to retrieve payments, open the mail and make copies. I am spared the chore of endorsing each check, filling out a deposit slip, and making a trip to the bank. The cost of a lockbox service is not an issue compared to the savings it provides in time and money. Still, because we are all human and prone to error, you do need to watch for mistakes. Considering all the transactions bank employees process in a typical day though they do a good job. With it I can see what payments have come in from virtually anyplace in the world with good internet access. An alternative between the two is using a remote scanner. My preference though is eliminating the need to physically handle the incoming payments in any way. If you do go the locbox route be sure the service scans the check and the payment stub on the same page. That makes it simpler to extract the PDF image whenever a copy is needed. You don’t want them scanning page images that mix the EOP or check from one company with that of another. Naturally, any other explanations (for credits taken, etc.) should follow sequentially, prior to showing an image of another payment that came in that day.
    Posted by Rex Brady on November 1st 2010, 11:54pm

    We have multiple lockboxes for types of payments and the bank does the keying for us. We upload to our AR subsystem and review, confirm in balance and post or reseach variances. Money in bank same day and posting is done usually within an hour. Disadvantage is we are still not using imaging and rely on a courier to supply us with copies of checks, support or correspondence needed for research. Advantage is we are SOX compliant for delegation of duties and AR not physically handling checks. Overnights must have a physical address for delivery and may take an extra day to post depending on cutoffs.
    Posted by Michelle Aljilani on November 2nd 2010, 12:22am

    We have a lockbox located in a different major city to cuts down on mail time and get the money in the bank faster, courier brings the backup next day. This arrangement was set up many years ago with a 3rd party provider and the fees are still reasonable (that 3rd party couldn’t beat the rate themselves). We have explored other banks and found capabilites vary. Electronic files and keying data are available for a price which basically offsets the courier cost (but not by anything substantial). We also have a desktop scanner for local mail and checks that come in from our drivers or reps (it eliminated the need for photocopies). A mega bank eventually came to discuss the auto-posting possibilities. The hit rate wouldn’t have been satisfactory, plus we would have to have a costly interface written so the present volume doesn’t justify the cost yet, at this point my staff can still process cheaper and quickly.
    Posted by D Marcroft on November 2nd 2010, 1:03am

    We have a lockbox in central location within the U.S., which helps to cut down on mail time. The average number of days it takes to receive the mail, sent from throughout the U.S., is 3 days. We made the decision because somf of our larger customers are on the other side of the country. We have subscribed to the service where the lockbox personnel keys in the data and scan the checks along with the supporting documentation. We’re able to download the data from the bank’s website, then upload it to our transaction system. Our payment application module takes the information provided and tries to match it up with an invoice number, order number or PO number. Any numbers that can’t be matched our flagged. It works great! It allows us to handle the high volume of payments much quicker. We only focus on the exceptions instead of keying each check or invoice. Of course, it eliminates the risk and the time of making deposits at the bank. It also saves time when we don’t have pick up the mail at the post office. We are going to have to find other ways to get us of our bottoms and move around.
    Posted by David Vaiz on November 3rd 2010, 9:31pm

    Poll: Majority of My Workday is Spent?

    February Quick Poll Results
    Click image to enlarge

    CMA’s February Quick Poll is complete. How do our members spend the majority of their workday? Put on that oxygen mask, over  33% of us spend the majority of our work day putting out fires. Including all the write-ins for “all of the above”, we would work our way into the 40% category.

    It is a sure sign of the stress the Credit Department has been put under. Shrinking staff and increasing responsibilities make for a “fire inducing” work environment.

    What are your thoughts?

    CMA Poll – Collection Methods