Here we are, smack dab in the heart of summer. As a film fan, I look at this as “Summer Blockbuster Movie” time. As with many recent summers, today’s movie scene is inundated with mega-blockbuster sequels – movie titles that end with “Episode II,” “Part III,” “A New Beginning” and so on.
In keeping with this idea, this month’s column is a sequel as well: “Reps Can Offer New Firms Credit Assistance, Part II.” While it’s not exactly as catchy or exciting as “X Men III: The Last Stand,” it will have to do.
In my last column I offered ways to utilize your rep to help you secure credit or open accounts with suppliers. In this column sequel, we’ll review how to use your rep when you need to maintain your credit and an open account in times of difficulty.
Your rep is your closest link to your supplier. He or she is not only the face of your supplier, but also – in a sense – your representative back to the supplier.
Part of my job as a rep is to do what I can to help my dealers when they are in a jam. I can’t necessarily go out and hustle up new business for them or personally collect on their delinquent accounts, but I can help facilitate a relationship between my dealers and the supplier, one that allows cooperation in troubled times.
When rough times do hit, the first instinct is to conceal it and then quietly manipulate what you can in the hope of overcoming the obstacle. Beware of such strategy. My experience is that, if you are in difficult straights, you are better off being up front about it, allowing your rep and supplier to work with you. As the situation becomes more and more difficult, your supplier and rep are going to catch on quickly, so it’s better to include them early in the process.
When it comes to bad debt, credit managers are tasked with the responsibility of ensuring that an account does not spiral out of control, leaving the supplier holding the bag. Today’s managers have systems in place to prevent this, and your rep is an integral component of that.
Thanks to the credit manager of a large cabinet supplier that I work with, I have compiled a list of items that you should be aware of if you do find yourself in trouble. These are all items that trigger your manufacturer and rep to start using the credit microscope on your account, possibly even freezing it.
- Your payment trend starts to change: This is one of the most obvious signs of impending bad debt, but it is often much more subtle than you may think. You imagine that a manufacturer may not catch on to a problem until your balance goes over 45 or 60 days or your checks start bouncing, but there are other earlier signs. Something as simple as not paying within your discount terms can set off warning lights. We have concerns about businesses that do not maximize their profits by taking discounts anyway, but if you have been doing so and then stop, that is a clear signal that there are financial issues that we need to be cautious about.
New orders suddenly increase or decrease: This, too, can be an indicator of financial difficulty. A sudden decrease in orders can indicate that you are expecting to extend or hold payment with us and you are placing new orders with another manufacturer with whom you have more room to grow debt. If orders suddenly increase, it may signify the opposite. We pay attention to this.
Manufacturers rely heavily on their reps to know why your purchasing patterns change.
- Credit requests skyrocket and become contentious: Any time a dealer starts turning credit requests into national emergencies, we immediately become concerned about the dealer’s financial status. This is often a clear indicator that the company is looking for ways to reduce its payables to us below a line where we will continue to extend credit to the firm.
- You start asking us to hold a check until next Tuesday: If you have been a good customer up until that point, we’ll usually work with you on this, but your account is going to be scrutinized much more carefully.
- You are unreceptive or unpleasant with our credit department when you receive calls about an overdue invoice: History demonstrates that the more confrontational someone is concerning credit issues, the more likely there is a financial problem. Most companies are anxious to resolve any credit mix-ups to ensure their good reputation and standing with their supplier.
- You don’t do what you say: If you give us the old “check is in the mail” line and it’s not, we’re not going to believe anything else you tell us.
- Communication becomes difficult: This is one item that ensures that the credit department is going to get your rep involved. If you stop taking your suppliers’ calls, stop returning phone calls or – my all time favorite – you only return phone calls after you know that the supplier is closed, your rep is going to get the call saying that the supplier is immediately freezing your account. Your rep then becomes intimately involved in the process.
- Your phone is no longer answered by a person or a machine: No more explanation needs to be added to this one.
Now you know what we are watching for, but if you are experiencing difficulties, you may not be able to avoid everything on this list. So, how do you utilize your rep to help you work through credit difficulties?
- Tell us that you are having a problem. If you owe your supplier money and are struggling, it’s in everyone’s best interest to work with you to help you become financially healthy again. We will work with you, given the right circumstances.
- Be reasonable. I firmly believe that you do not send good money to chase bad money, and your supplier is not going to step in and bail you out. Understand that your supplier is not a bank and is not in the business of loaning money. However, if you make sensible requests that demonstrate a reasonable chance for the supplier to recover what is past due, the supplier will listen.
- Be willing to show good faith by paying what you can on your past due account and offer a plan and schedule on how you can make good on the rest. Your account can recover, and that’s what everyone wants.
- Be honest and do exactly what you say you will do. If you have a good relationship with your rep and your supplier, they truly do not want to close your account. If you are honest with them and live up to your agreements during difficult times, they will both go out of their way to help.
Communicate with your reps and let your reps work with you when times are tough. They are, after all, your link to your suppliers.