Small orders often require only minor credit investigations. However, if you're supplying a large volume of product to a single customer, you want to be sure you have all the information you need to collect down the line. This construction industry supplier makes certain he has the information he needs to ensure prompt and effective collections.

Editor's Note: This article originally appeared in the Credit & Collection Manager's Letter, which Credit Today purchased in 2006.

When Donald Treiber, CCE, receives an order from a new customer, he makes a quick credit check in D&B and may also follow up with a D&B fax. He then approves the order if the customer's credit rating is acceptable.

• A signed sales purchase order. Clow's terms and conditions are printed on the back of this document. "If a customer gives us a purchase order, but will not sign to our terms and conditions, we scrutinize the terms and conditions they desire very carefully," he says. "If we find something with which we disagree, we will send an exception letter." The letter basically says the following:
  "We received your purchase order and agree with your terms and conditions, except for Items # ______. We would like to have these deleted for the following reasons…"
  Treiber sends two copies of this exception letter. The customer signs one and returns it to Treiber and keeps the other for its files.

• A signed credit application. This also has Clow's terms and conditions printed on the back. In addition, it contains the following information: the bonding agent, the bonding surety, the engineer, and the lender (in a non-bonded job).

• "Notice of Commencement." Treiber requires this from customers doing business in "pre-notice states." This notice provides the names of people who must be notified to protect lien rights.

• A tax-exempt form where appropriate.

• Bonded jobs. "We verify all bonded jobs by calling the bonding agents," he says. If he doesn't know the bonding agent, he looks up the information in the Obligee's Guide, published by the Surety Association of America. This guide contains a voluntary list of surety companies and how they can be contracted for purposes of authenticating a bond.
  Treiber says this process is very important. "It's not impossible for contractors to create their own bonds and have them printed up," he says. "Such bonds are not valid. However, some contractors do this because they know that their customers often don't check them out."
  In one case, a school board in Michigan failed to check a contractor's bond. The contractor collected for the job, failed to pay the subcontractors, and skipped the country. "However, the subcontractors were allowed to sue the school board, which then had to make good on the payments to the subcontractors," Treiber adds.

• Non-bonded jobs with a lender. "If we're going on a non-bonded job, I find out who the lender is," continues Treiber. "I then call the loan officer, explain that we are on the job as a supplier for a particular amount of money, and ask if we can contact him in the event of a problem."
  Naturally, the loan officer wants to hear from Treiber in the event of a problem, so that something can be worked out. Otherwise, common practice would be for a subcontractor or supplier to file a mechanic's lien, which the lender doesn't want. "Since the lenders control the funds, they will often be our collectors," he explains.

• Non-bonded jobs without a lender. If Clow is involved in a private job that has no lender, Treiber will contact the engineer. "Many are project managers, and they verify the payouts," he explains. The engineers are the ones who go to the owner and report: "Everything is on the job, so you can go ahead and pay _____."
  "I advise the engineer when all of our products are on the job and we have not received payment," he states. "Since the engineer doesn't want a lien filed, he can assist with our payment by contacting the owner. This action sometimes prompts the owner to pay on a joint check."