"Few customers like to release financial information, because they feel as though they are going to be put under the microscope," notes target="_blank">Daniel Peer, CBF, manager, Customer Credit for National Gypsum Company located in Charlotte, North Carolina. "However, we've found that if customers feel as though they're going to get something tangible in return, they're much more receptive to providing financial statements."

What is that "something tangible"? National Gypsum found out a couple of years ago during some detailed investigation of the publications that provide financial benchmarks of companies by SIC codes.

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

"We were unable to get information targeted specifically to drywallers, who are our customers," notes Peer. "The SIC code under which drywallers fall also covers a lot of different kinds of businesses. So the information we had access to didn't zero in closely enough on our customers."

Since the information wasn't available, National Gypsum decided to create its own database, using its own customers for the information.

Here's what they did:

1. First, they sent letters to most of their customers, explaining that they wanted to create industrywide financial data on drywall suppliers and asking whether the customers would be willing to participate by submitting copies of their most recent year-end financial statements (audited if possible, but unaudited otherwise). In return, with the customer's consent the company promised to share the results with the customers who participated, showing them how their financial performance compared with the average.

   A large number of those solicited responded by submitting their financial statements.

2. Upon receipt of the financial statements, National Gypsum divided them into three groups based on customer sales volume reported in the financial statements: small, medium, and large. Next, the company created financial spreadsheets using the financial statements.

   "We showed, by sales volume, how each customer compared with its peers in that sales volume category and how each compared with the industry average as a whole," reports Peer.

   Some of the measures included in the spreadsheets were current ratio, DSO, days payable, days inventory, sales to total assets, debt to worth, cash, and notes.

3. Once the spreadsheets and subsequent reports were completed, representatives from the credit department tried to visit customers in person to hand-deliver the results and discuss them in person. It mailed results to the other customers, with an explanatory letter on how to interpret the results and comparisons.

"It turned out to be a good 'wake-up call' to a lot of customers," notes Peer. "Some customers who thought they were doing well found out that maybe they weren't doing so well compared with others in their industry and sales range."

Financial Advisors

One of the most obvious results is that National Gypsum was able to obtain a large number of financial statements from its customer base, which helps it to continue to assess creditworthiness and stay on top of customer financial strength.

Just as important, it built goodwill between the credit department and the company's customers. "It placed us in a proactive mode with our customers, shedding a different light on us and what we do," Peer adds.

Finally, it enabled the customers to identify areas of strength and weakness, thus helping them shore up any troublesome or potentially troublesome areas. "The stronger our customers become, the easier our jobs become," notes Peer.

The project was so successful that the company plans to do it again in the near future, making it an every-three-year project. "This time we're considering dividing the data up even further--by geographical region," he says. "This will make the numbers even more useful and important to our customers."

Editor's Note: The above article originally appeared in the Credit & Collection Manager's Letter, a newsletter purchased by Credit Today in 2006. This article originally appeared prior to 2000.