Working in cooperation with the Sales Department is crucial to the success of the Credit Department. In many companies, the two departments consider each other enemies. The credit department is often called the sales prevention department. it should never be forgotten that the two departments have the same goals: the health and growth of the business. This is accomplished when sales increase and collections keep pace.

Personal Impression
First impressions are not always the most accurate barometers of answering a test question or judging reliability of a potential client, but they should not be neglected.

One of your most reliable sources of information about a customer lies specifically in your personal impression. If a potential client is comfortable and willing to provide necessary information, the creditor is apt to more keenly judge the client's character and better assess possible risk groups. For an information meeting or phone conversation, the following guidelines are most helpful:

1. Carefully review all existing information as a base.
2. Decide in advance what information you need. This can include business background, experience, current financial position, and future plans.
3. List alternate questions in the event answers are vague or the client tends to "skip around the question." Always attempt to get the information you desire.
4. Record all information garnered as soon as possible. Were all questions answered in a satisfactory manner? Was your purpose achieved? Why or why not?

Again, personal impression is a major factor in determining potential client reliability. Should a negative first impression automatically disqualify a client? Not necessarily.

Pre-Screening Orders
One way in which the Credit Department helps Sales is by prescreening prospective customers. Salespersons can avoid wasted time and effort if they only approach potential customers that may be approved for credit. By using information gathered through the normal course of business and through the use of credit applications, when appropriate, the Credit Department can develop a fairly good picture of the credit worthiness of a prospective customer.

If the customer is new and a credit application has not been received yet, then a quick D&B rating check should be able to tell you years in business, financial strength and pay history. With this new information, the sales personnel then know what parameters they are bound by and what the credit department is likely to approve. The sales personnel can suggest a cash account at first, if they know that the prospective customer is not a good credit risk, or they can offer cash discounts in lieu of credit.

On the collection side, the sales department should realize that when the Credit Department is able to reduce the time in which a customer makes payments, the time between orders of new product is also reduced, since payment and orders often accompany each other. With proper understanding and team effort these two department can be a much stronger force in a company's success.

The credit manager additionally acts as a customer service representative. When calls are made, complaints are heard and actions must be taken. Public relations and customer service go hand in hand.

Go back over your guidelines, records and notes to consider the reasons for your hesitancy in accepting the account. If you have to, speak with the client again, before you decide. Additional sources might have to be pondered.

Checking Credibility
These days, you need more than three trade references and a bank to verify credit. You should ask for whatever data is necessary to make you feel comfortable about granting the full limit desired.

The last three months' bank statements will reveal valuable information such as:

• A complete quarterly picture of the company's cash disbursements and cash receipts.
• The largest check written in the last 90 days.
• The times during the month when the customer has the highest and lowest balances.
• If there were any NSF checks, and whether the bank covered them.

Any customer should be able to give you this data, which can uncover valuable information about their operations that you might not find elsewhere.

Example: One customer wanted a $20.000 credit limit and we were inclined to grant it. But bank statements revealed the customer had never written a check for over $6,000, and its checking account balance over a three-month period was running Medium 4 ($5,000).

Based on that information, we decided we needed a financial statement before making a decision.

Financial Statements
Financial statements are more readily available than many credit people realize. A company's credit application should have a box on its form which could be checked off that says "Financial Statements available upon request". If you do not ask, you do not receive.

Joint Check Agreements
We often use joint-check agreements for companies that don't warrant high credit limits but happen to have a big order from a credit worthy customer.

Example: At this point in time, the credit worthy customer is instructed that when payment is to be made, both our debtor and our name is on the check (that is why it is called a joint-check agreement). This way, when the customer pays our client, we have the leverage to make sure that we get paid too. Why? Our name is on the check and we have to endorse it before it can be cashed.

Eric Shaw
New York Credit Inc.
929 Howard Street
Marina del Rey, CA 90292-5518
Phone: 310-827-0076
Fax: 310-578-9228

eric@nycreditinc.com
www.nycreditinc.com