Straight Talk on Collections
"Fool me once, shame on you. Fool me twice, shame on me." That sums up the collection philosophy of Troy Anglin, credit manager for Radiator Specialty Company (Charlotte. N.C.). "I always give the customer the benefit of the doubt," he says "If they tell me a payment has been sent, I believe them. If they tell me the price on an invoice is in dispute, I take them at their word--until the facts prove otherwise. At that point, the gloves come off and it's time for straight talk." The chain of reasoning Anglin uses is as follows:
- You requested product on open account terms, and asked us to trust that you would pay it on time.
- We shipped exactly what you asked for.
- The invoice went past due because you did not honor your commitment to pay on time.
- We followed up on the past due balance and you made another commitment--this time an explicit commitment for payment by a certain date.
- You broke that commitment as well.
- You have now created a serious problem, and only you can solve that problem.
- We expect your payment immediately.
"I haven't been intimidated by a customer for twenty years," he says. "If a customer lies to me; if a customer breaks a payment commitment; if a customer tells me there is a shortage or a pricing discrepancy and I find they lied; I will be on the phone with them as quickly as possible and I'll want an explanation. If they avoid my call, I'll keep calling and keep escalating until I'm talking to the person in charge. In fact, one of the tools I use to get people to respond to my calls is to tell the operator that I want to speak to 'whoever is in charge there right now.'"The Sales Department
What does Radiator Specialties' sales department think of Anglin's collection practices? "Who cares?" he replies "Do you think salespeople sit around at the national sales meeting and golf outing discussing whether or not the credit department will be happy with this or that new program they are coming up with? Of course not! I've never met a shy salesperson in my whole career. If the sales department has a problem with any of the credit department's policies or practices, they'll be the first to complain and the most vocal. When considering a new account for credit, Anglin wants to see a credit report and three references. If the references tell him the customer pays well, but the credit report tells a different story he will often ask for three more trade references. If he is asked why he needs additional trade references, he simply states that the information gathered so far is contradictory and confusing. "If the customer is legitimate, they will provide the additional references," he says. "If not, my request for additional information is normally the last we hear from that applicant." Every active account is reviewed every year. Customers that have not bought in the last 365 days are automatically reclassified as dormant accounts. Before an order is released on a dormant account, the credit department must approve it. "Before we approve it, we update the credit file and then make a decision about whether or not to release the order," he says. Financial Statements?
"Our privately held customers are very secretive about their financial statements," he says. "Therefore, we don't normally request them. When it is necessary, we require financial statements as a condition for continuing to ship, or for increasing the customer's credit limit. One thing to remember is that privately held customers' financial statements are normally internally prepared and not audited. In terms of accuracy and reliability, internally prepared financial statements are better than nothing--but often they are just barely better than nothing. Each Radiator Specialties customer is coded as being low, moderate, or high risk, with almost every new customer considered high risk until they demonstrate ability and a willingness to pay on time. Chronic slow pay accounts are also flagged in the computer system as high risk. "Sometimes, customers that do not share financial statements are classified as high risk," says Anglin. "Accounts that management has approved over the objections of the credit department are also classified as high risk, along with customers who lie, break payment commitments, ignore our calls and messages, or treat the credit department with disdain." 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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