CoatingsPro Magazine

NOV 2015

CoatingsPro offers an in-depth look at coatings based on case studies, successful business operation, new products, industry news, and the safe and profitable use of coatings and equipment.

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18 NOVEMBER 2015 COATINGSPROMAG.COM Money Matters An exchange between the sales and credit departments must take place in order to establish a sound and profitable business relationship between you and your customers. C ompanies, regardless of what industr y and whether in dealing w ith goods or ser vices, cannot operate w ithout cash f low. It's that simple. A sale is not a sale until the funds have cleared the bank. With that said, due diligence and know ing your customers are going to be two of the most, if not the two most, important elements in any transaction where credit and terms have been applied or are being considered. So what happens when your customer can affect your cash f low? How can you avoid giving out credit that w ill be abused or not returned at all? W hat do you do when it isn't? Extending Credit W hether you are a manufacturer, distributor, or dealer, the credit and collection department is crucial. For example, if you are a manufacturer, what would your sales department do if it was servicing a large chain that seems to be having fnancial difcul- ties? Would the sales representative be knowledgeable enough to inquire if the franchisor or the parent corporation would guarantee any of the franchisee's debts? Is this even an option? Te credit department should have this type of information on fle. As most people realize, it is not a simple decision to sell a product or provide a service and hope that full payment will be forthcoming. An exchange between the sales and credit departments must take place in order to establish a sound and proftable business relationship between you and your customers. As a contractor, what if it's a smaller entity you're dealing with and you can't seem to determine who the actual owner is? W hen it comes to the "Five C's of Credit," character arguably trumps capacity, capital, collateral, and conditions. Knowing all about the owners of customer companies prior to any sale or execution of agreement(s) is critical to good credit analysis. A lthough someone might have a good reason to conceal his or her owner- ship of a business, it should serve as a warning sign to a credit analyst in most instances. Back to the decision at hand: Should you extend additional credit to a customer who is having difculties? Among the many considerations are: • "If I cut off shipping or services provided now, will I force my customer out of business and lose every penny I am now owed?" • "Will it give us any leverage to get payments current, begin negotia- tions, settle, and/or cut our losses?" • "Will the customer just go to another Credit Lines and Collection By Al Dias, Vice President of Consulting for Commercial Collection Consultants

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