How Antitrust Laws Affect Your Credit Functions, by Michael C. Dennis

Penalties for violations of applicable federal or state antitrust laws can include fines, imprisonment, and liability for up to triple damages. How do antitrust laws affect day-to-day credit decision making and business activities? To what extent is pricing and payment terms subject to U.S. antitrust laws? Is it a violation of one or more antitrust laws to offer Customer A payment terms of Net 30 days and a direct competitor of Company A payment terms of Net 60 day? Are cash discounts an element of price? In other words, if we offer a 2% early payment discount to Company A, must we offer that same discount to its competitors?

It’s time to do a self quiz. I think the answer to one or more of these questions may surprise you. Did they? As always, I welcome your feedback.

Michael C. Dennis is the author of the Encyclopedia of Credit, a free, fast, internet resource for credit and collection professionals. He is a frequent instructor at CMA-sponsored educational events. His most recent book, “Happy Customers, Faster Cash,” is available at amazon.com. He can be contacted at 408-204-0129.

It’s Frustrating, by Michael C. Dennis

Credit managers, are you involuntarily contributing to this situation by lack of communication?

With some customers, getting the purchase order is a long process that involves significant work by your salesperson.  It is easy to understand how frustrating it may be if at the end of a long process it turns out that the company is not creditworthy.  There is no simple solution to this problem, but the credit department can help by working with sales as early in the process as possible and by evaluating the creditworthiness of the company and sharing information and insights with sales.

I know some of you will agree that is not always possible to offer a definitive answer about a potential customer’s creditworthiness until you have completed your review process.  However, the fact that you provide any guidance to your sales department in advance is better than sitting on your hands and waiting for these orders to be submitted.

I choose to work with my sales team to help alleviate frustration. How about you?

Michael is the author of the Encyclopedia of Credit (www.encyclopediaofcredit.com), a free, fast, internet resource for credit and collection professionals.  He is a consultant, and the author of “Credit and Collection Forms and Procedures Manual” as well as a frequent instructor at CMA-sponsored educational events.  He can be contacted at 949-584-9685.

I Am Now Working Part-Time – Michael Dennis, CBF

Get In Balance
Get In Balance

I was talking to a friend of mine recently at an industry credit group meeting.   He told me over lunch that he was now working half days.  I congratulated him.  He told me his comment was meant as a joke and that half-days meant he was working 12 hours a day, every day.  He explained that his credit team had shrunk by 50% over the last 2 years because senior management would not approve job requisitions as people left the credit department.

He has been working at least 60 hours a week for more than a year, and told me it was taking a toll on his family life and probably his health.  I asked what he planned to do differently, and he told me that in this economy he felt lucky to have a job… but that if a better opportunity presented itself then he would certainly consider it.

In my opinion and in my experience, job opportunities rarely present themselves.  People normally change jobs after an extensive job search.  The math works something like this:  For every 100 jobs you apply to, you will receive perhaps 10 responses.  For every 10 responses, you are likely to become a finalist for one of those ten jobs on average.

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

My advice was for him to either (a) change his present working conditions starting with a candid face to face discussion with his manager, or (b) change his employer through an active job search.  After all, all he has to lose was his health and /or his marriage.

When you are stretched to the max at work what approach(es) do you take to reduce your stress level and the impact on your personal life?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

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Fishing For Information – Michael Dennis, CBF

Fishing For Information
Fishing For Information

In the last week, I have received calls with questions from two different members of our industry credit group.  In both cases, the answer to the question was essentially a click away and I referred the callers to the Encyclopedia of Credit.  As some of you already know, access to the Encyclopedia of Credit is available at no charge, and it is searchable by subject.  At present, the Encyclopedia of Credit contains well over 1,000 essays on a wide variety of credit and collection related topics, with additional information being added or updated every week.

Don’t get me wrong.  I enjoy speaking with other credit professionals, and I consider many of the people in my credit group to be friends as well as colleagues.  That said, my decision to refer the callers to this online resource is reminiscent of this old adage:

Give someone a fish and you feed them for a day.  Teach someone to fish and you teach them to feed themselves forever.

So, if you are fishing for information on almost any business credit related topic, I think your first step should be to visit the Encyclopedia of Credit website, located at:  www.encyclopediaofcredit.com

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

In my opinion, the information it contains is practical, pragmatic, factual and authoritative.  I think it is one of the most valuable resources Credit Management Association makes available to its members and probably one of the least frequently used.

Do you have any other online sources of information that you visit and would like to share with other CMA Members?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

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Credit Automation – 5 Years Later – Michael Dennis, CBF

5 Years Later

Five years ago, I wrote an article entitled “Twenty-Five Tips on Deduction Management.”  This article resulted in several speaking engagements for me.  I ran across this article quite recently, and I was amazed by what I read and by what I didn’t read.  Only 1 of the 25 tips addressed credit automation and more specifically deduction management software.  That 1 tip was exactly 25 words long.  It read:  “Develop your own, or purchase commercially available software that allows you to track the status and the actions taken to address and resolve customer deductions.”

If I were going to write this article again, the main focus would be the effectiveness of deduction management software.  I would focus on how deduction management software has matured and is now a ‘need to have’ rather than a ‘nice to have’ tool for many credit departments — especially those whose customers routinely and aggressively take deductions.

I have said before that the ‘worst thing’ that can happen when a customer takes a deduction is they may eventually have to repay a deduction taken in error.  However, in the mean time, the customer gets what amounts to an interest-free loan from your company.  The key question is how long that interest-free loan will remain outstanding.

Without a tool that enables your team to systematically address customer deductions, managing customer deductions is like trying to hold back the incoming tide with a mop and a bucket.  What is the solution?  In my opinion, one strong candidate for a solution to the problem is deduction management software.  I think you will be impressed by its capabilities, its ease of use, and how effective it is in helping the creditor to resolve deductions quickly and efficiently.  That’s my opinion anyway.  What’s yours

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them

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Nice To Know Meetings – Michael Dennis, CBF

Nice to Know

Like most managers, credit managers are invited to attend numerous meetings.  A friend of mine works for a company where he routinely spends 15 hours a week in what he calls Nice to Know meetings.  These are not special meetings called to address and resolve particular issues or concerns, and the most painful to attend is a 4 hour long meeting each Monday in which every department manager provides an update relating to their progress relating to plans, processes and problems.

As the name suggests, a Nice to Know meeting is one in which the information being discussed may not be necessary for attendees to perform their work.  The issue that I want to address is how to avoid attending Nice to Know meetings.  The first trick I learned is that when I receive an automated invitation to a meeting, rather than accepting or rejecting, I select the third option… which is to tentatively agree to attend.  This means if I find the subject matter interesting I might attend unless: (a) I get a better offer or (b) a project or a problem requires my attention or (c) I am too busy to attend, or (d) I am just not in the mood to attend.

Another useful tool is to respond to an invitation with a series of questions, such as these:

  • Have you published a meeting agenda?  If not, please send it to me ASAP so that I can decide if my attendance is necessary
  • Will I need to attend the entire meeting, or can I attend a portion of it?
  • What specifically will you need me to share during this meeting?
  • Do you have any objection if I delegate the task of attending to someone else?
  • Is there a dial in?  I ask this question even if the meeting is down the hall.  Why?  Because I prefer to attend by phone so I can get other work done while listening to the meeting with my phone muted

I think you will be pleasantly surprised how easy it is to avoid attending many Nice to Know meetings.  Some of you may be asking if there has been any backlash relating to avoiding Nice to Know meetings.  I think the answer depends on the individual.  If you tend to isolate yourself anyway, or if your department is ostracized to some degree within your company, you probably want to attend some of the Nice to Know meetings.

Michael Dennis, MBA, CBF, LCM

What should you do with the time you save by not attending Nice to Know meetings?  To most credit managers, I would say this:  Try leaving on time once or twice a week.  I think you will find it to be a pleasant experience.  That’s my opinion.  What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

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A Balancing Act – Michael Dennis, CBF

Balancing Act

A few years ago, a good friend of mine who worked in the automotive aftermarket industry lost his job as a credit manager as a direct result of his management of bad debt losses and DSO.  More specifically, he was fired because, under his guidance, the credit department had not written off any bad debts for three years.  Sales had complained that the credit decisions being made were far too conservative and way too risk averse.  The company’s senior management eventually looked at the information about losses and concluded that sales management was correct.

Credit decision-making is a balancing act with unexpected and unbudgeted losses on one side and lost sales and lost profits from overly conservative credit risk management decisions on the other side.

Is it common that a credit manager loses their job because they are too risk averse?  I think it is more likely that the opposite is true meaning that credit professionals lose their jobs because they accept too much risk resulting in higher DSO or higher bad debt write offs.

Michael Dennis, MBA, CBF, LCM

However, the fact that my friend was fired is a good reminder that credit professionals are expected to manage credit risk according to their employer’s expectations.  They are not expected or required to eliminate the risk of slow payment or nonpayment.  What do you think?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

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