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
You mentioned in one of your other columns outsourcing your credit department. How does that work and how do you choose? I have struggled with interviewing credit managers and the questions to ask. How do I interview an entire company?
signed, Seeking Alternatives in Albuquerque
I LOVE interviewing credit managers! The war stories, the one-upping of tragic tales of accounts gone awry, the crazy-like-a-fox sales reps’ comparisons, and of course listening to the pride and satisfaction in a fellow credit manager’s voice as they recount how they took a snot sandwich in a to-go box and turned it into a win for the company. Oh, I envy you.
Oh wait, you want to outsource. Okay, here goes:
There are several companies out there that will stand in and be your credit/collections department. The challenge for you will be to decide which one is the right fit for your company. Here are some steps to help up you navigate these waters:
- Determine what exactly you want to farm out and what parameters you find acceptable. Is the prospective company doing the application research only? Will it recommend to offer credit, and if so at what limit? What are the collection guidelines? When do you want its employees to start calling? When does this firm file liens, and when is collection action accelerated (i.e. to a lawsuit or collection agency)?
- How much communication do you require: Daily? Weekly? Monthly? As needed? And what type of interaction do you want?
- Are certain customers off limits? What are the limits in general? Does this outsourced firm need to check with you prior to any escalated action? Can it cut the customer off, or does that need to go through you?
- Ask around to see what other companies like you are doing or who they are using. Ask if they have recommendations. Ask why—a lot.
- Ask the director of any associations you belong to about firms they have experience with and/or can recommend.
- Ask your distributors to name providers they are familiar with and, if they had to make a choice, which firm they would go with and why.
Once you have identified a few
companies, start checking them out on your own.
First: Review their website.
Second: Google them. This is a great, often overlooked tool. You can find all types of bits and pieces. If someone is unhappy with a company, there is most likely a site or posting that will share it. The information may or may not be accurate but you have some context besides propaganda. Remember the principle: Forewarned is forearmed.
Third: Email or call them.Yes, you will eventually have to watch a demo or hear a pitch on how the service works. This will help you determine which company offers the closest to what you are looking for and who you want to work with.
Fourth: Review the contract in detail BEFORE you sign. What cancellation clauses are there? What about indemnification, uncollectible accounts, and associated cost like preliminary notices, lawsuits and such. Walk through every step of the process before you sign anything. This is time-consuming, I know, but it saves a lot of heartache later on.
I am a relationship person. If someone is trying to get my business and doesn't listen to what my needs are and then offer solutions based on what I have told them, you can bet they will be going home empty-handed. Keep in mind this service is just like any employee or service: They work for your company. The relationship needs to be easy to navigate and flexible.
You have to be comfortable with whatever path you choose. Whether you hire someone or engage a company, it is still going to be a cost. You have to weigh out the costs vs. the benefits vs. the drawbacks and see what makes the most sense for your company.
I myself am partial to having a credit manager in-house, but then I am biased!