When economic times get tight and companies are vying to take business from their competitors, there may be a tendency for credit decisions to take a back seat to sales, especially on a potential customer that truly is not creditworthy.
At first blush, it may seem that the credit manager’s expertise has not been valued or appreciated. But if we step back for a moment, could we, as credit professionals, determine if we have done everything possible to help the sales department to expand sales safely?
Assuming we have more than enough financial and trade history on the customer, I would venture to say that if a credit manager is not willing to offer credit at any level, most likely the same idea will apply to the credit insurance and non-recourse factoring companies as well. We can also rule out the idea that the customer can obtain an irrevocable letter of credit.
But what about the possibility of selling on credit based upon a personal guarantee that is supported by a credit card of the president, CFO or someone in the executive management? This may or may not be the complete answer, but it’s worth asking. If this is possible then at least then there is bit of credit protection, upon confirmation that the card is valid, and remains valid up to the payment date for use if necessary.
Although this may sound a little obsolete in these times, there’s nothing wrong with requesting postdated checks. Again, this seems like a long shot thing to do but I think there is some psychological value to requesting this. If the client already knows that they have given post dated checks to the supplier, there is a tendency to not let them default.
Our goal, as credit professionals, is to try and minimize the number of times that our credit decisions are overridden. We can do this by being as creative as possible, offering options that just might work with the client, the sales department, and the company so that the business can keep on growing.
Your comments are most welcome.
Nancy Seiverd, President, CMI Credit Mediators, Inc. (nseiverd@cmiweb.com)
