Credit guru Thea Dudley has spent more than 30 years in LBM credit management. Now she's here to answer your credit and collection questions. Got a question for her mailbag? Contact Thea at firstname.lastname@example.org
How do I not go postal on a sales rep who wants to sell an ex-customer, on credit, who almost burned us? I barely got our money collected last time and it took forever. I don't even want to sell this customer COD, let alone trust him with an open line of credit. My sales guy is driving me nuts, telling me I am closed-minded and that ALL our competitors have given them credit. UGH!!!!
Signed, I don't get it in Idaho
Dear Don't Get It:
I know what you mean. I always want to ask the sales rep if that is the only customer in his territory, because it's the only one he talks about. I consider those customers the one your mama warned you about. You know, the one you should stay away from, but find irresistible? Your sales guy can't help but be beguiled by the one who is about to get away.
"Thea, I looked into this customer’s eyes and the trust was gone. He isn't sure he can trust you either." Hello, WHAT??! Did my sales rep start reading Twilight or some other teen-age romance novel? How did this get turned around?
Never underestimate the power of a person to play the victim role and place the blame on others.
So let's get to the rat-killing. You will have to find at least one solution to this situation or it will boomerang back on you and hit you in the head. I didn't say your solution(s) would be popular or a big hit, but they will be an olive branch of sorts.
Take another look. How much time has passed since the incident? A week, a month, a year, two years? If the wound is relatively fresh, put one toe in the pool by offering COD with a cashier’s check if that makes you comfortable. Put your whole foot in by accepting a check from said questionable character. COD is a first step. If you accept checks and they don't bounce, nothing comes back at you, the customer is trending in the right direction. You may never get off this step with this customer, but you are selling him.
If the slow pay bordering on no pay was some time ago, then you have some reconsidering to do. Examine all the information you compiled and see what you are working with now. How old is the credit application? What does the potential clients’ business credit report look like? Has his financial position improved? Does he have a new bookkeeper—or finally hired a bookkeeper?
Take the bold step and call the one-time deadbeat. Have a conversation, voice your concerns. Remember, you already are on a first name frenemy basis with this person since you've had numerous heart to heart chats with him about his account previously. So call. Nothing intense, just an honest "I understand you would like you like an account again, it didn't go as planned last time, can we discuss how we can move forward?"
Try to look at the situation (i.e., the customer) as objectively as possible. This will most definitely be the toughest part. If you find you cannot do that, involve others in your department or your controller, CFO or any other financially minded individual. Have them take a look at the facts and get their input. It is not easy to put your righteous indignation (although I can validate it) aside. Look at things with a fresh view.
Then turn back to your sales rep. What is the profitability on the account? What are the margins? What is the opportunity? Where has this customer been purchasing since he left us (then make a call; nobody wants someone else's trash). If the margins and opportunity are good, you should be be more willing to reconsider.
If credit decisions were black and white, it would be easy. But they aren't. Credit lives in mostly a gray area. At least I do. And the target is a moving one. You are charged with making insightful risk/reward decisions—and notice I didn't say "best". If I made the "best" decision, we would have a lot fewer sales.
You have to look at each customer with a risk/reward mentality. If that mentality still leads to a hardy "hell no," then so be it. The important part is you looked for a way to sell, responsibly.