Credit Training - An Emphasis On Product Knowledge
Is money the problem when customers don't pay on time? Or is it dissatisfaction or unanswered questions over product quality, delivery, service, or sales documentation? Increasingly it's the latter, which is why credit staffers need in-depth and continuous product training.
"Our products have become so specific over the years, and our marketing techniques have become so product-specific, that having credit generalists is no longer effective." Speaking is Corporate Credit Manager Richard Davis of Herff Jones, Inc., an Indianapolis, Indiana, manufacturer of scholastic products, such as yearbooks, caps and gowns, class rings, and educational aids. But his statement could come from any number of credit professionals we've talked with. Credit staffers who lack solid and extensive product knowledge are at a serious disadvantage in today's business environment. "In the majority of cases," Davis continues, "the reason for nonpayment has little to do with customers having cash-flow problems." Most often, he says, delayed payment was the result of
- merchandise quality problems
- delivery problems
- incorrect invoicing, or
- returns of merchandise for credit
So when credit representatives call customers to inquire about payment without knowing enough about the specific nature of the product, shipping information, or other details to be able to resolve the problem, they fail in two ways: They are both unable to collect and unable to provide the full service customers need and expect. Late last year the Herff Jones credit department tackled this problem by restructuring from a staff of generalists to a four-unit department of specialists. Each specialist now handles credit extension, collections, and after-sale service problems for a specific product line:
- Yearbooks
- School photography
- Scholastic products (rings, diplomas, caps/gowns)
- Educational aids
To fill all the positions necessary to achieve this structure and to resolve the previous understaffing situation, Davis was authorized to hire additional full-time employees. Customer Service Emphasis
While customer service departments at each of the company's manufacturing facilities still handle order entry and other customer service issues prior to shipping and invoicing, Credit is now extensively involved in customer service issues after shipping and invoicing. To provide the training credit staffers needed to provide this service, Davis arranged for his employees to do the following:
- Meet with sales managers for all divisions. "We explained our need to become more involved with their sales reps and customers," says Davis. Employees learned about how the sales departments went to market, the various roles and responsibilities the salespeople had, the pricing structures, salespeople's delivery commitments to customers, how ordering and backorders were handled, etc. "We also began attending their sales meetings to stay updated on new issues," he adds.
- Visit the company's manufacturing facilities to meet with with key personnel. They not only gained a better understanding of how products were manufactured and shipped, but they also became familiar with the products themselves and any unique buzzwords associated with the products that might ultimately help them better communicate with customers.
"Our overall goal in meeting with Sales and Manufacturing was to better understand our business from our customers' perspectives," he emphasizes. "We wanted to be able to put ourselves in our customers' shoes when they received shipments of our products." Since most delayed payment problems tended to result from issues other than customer cash-flow problems, credit representatives have always made it a habit to first contact the customer representatives responsible for ordering and receiving. "We've found that Accounts Payable tends to make payments in a reasonable time frame once they receive all the paperwork from the department that placed the order," he explains. With the new structure, these relationships are emphasized even more. And now that staffers are specialists in their product lines, they can communicate better with customers, identify problems or concerns, and work quickly to resolve them. This not only helps to speed up payment but has provided an additional benefit. "Our employees are getting to know their customers better, on both a more personal and professional basis," explains Davis. One result is that customers are now occasionally calling their Herff Jones credit representative when there is a problem, instead of waiting for Herff Jones to call them. Since the credit representatives now have closer relationships with the plants, they can alert them to returns. "We sometimes find out about customer returns before the plants do," explains Davis. "When we give advance notice to the plants about the details of returns, such as products, values, and methods of transportation, they can get a jump on the paperwork." Improving Receivables Balances
In the first six months of the program, Davis has already seen an 11% improvement in receivables balances. "Hiring additional staff added cost to our department, but we strongly believe that on an annual basis we will save more than the expense as a result of improved cash flow," he says. He cites an example of how the new structure is improving cash flow: In the past, a number of large customers had a policy of not paying invoices until shipments were 100% complete. Frequently, though, Herff Jones made shipments that were 90% to 95% complete with 5% to 10% back-ordered. Because of the lack of communication between the credit department and the plants, the credit department rarely knew the status of shipments and back orders. They would call customers to seek payment on the first shipment, only to be told that payment would not be forthcoming until the second shipment (back order) was received. Under the new system, the credit department and plants are in constant communication. If a customer places an order that cannot be filled and shipped 100% immediately, the credit department can call the customer and offer options:
- If the customer immediately needs the products that are currently available for shipment, Herff Jones will make the partial shipment in return for a promise to pay for that partial shipment and to then pay the balance separately when the final part of the order (the back order) is shipped.
- If the customer does not need the products immediately, they have the option of authorizing Herff Jones to wait until all the units are available and then making the full shipment.
"Either choice by the customer gets us paid quicker, based on invoice date and payment-received date," explains Davis. While restructuring the credit department has led to improved customer service and cash flow, Davis envisions even more opportunities to improve both by means of technology. "We're looking into working with our larger customers on electronic invoicing and electronic payment. We've already enhanced communication with our customers with electronic mail for all our credit representatives." "Our overall goal in meeting with Sales and Manufacturing was to better understand our business from our customers' perspectives." "We sometimes find out about customer returns before the plants do." 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.
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