Magazine article Business Credit

Accidents (and Disasters) Will Happen: How Much Flexibility with a Blindsided Customer Is Too Much?

Magazine article Business Credit

Accidents (and Disasters) Will Happen: How Much Flexibility with a Blindsided Customer Is Too Much?

Article excerpt

There you are, you, your credit department and company's business, trucking along smoothly. Invoices are getting paid by customers, days sales outstanding is low, cash conversion is not a problem. Then, it happens. Text and social media messages come flooding in, and break room conversations start with "Did you hear what happened?"

Disaster strikes--sometimes with no notice, or catching people off guard because they opted to stay optimistic that things would work out, or at least not be as damaging as hyped. Levies preventing a major port city from flooding fail, even after news proclamations that they were holding just fine (Hurricane Katrina). Entire coastlines are altered forever, and some towns literally washed away (Hurricane Sandy). Residents and businesses are left with nowhere to take shelter and entire areas are temporarily condemned after damage from an earthquake and tsunami lead to dangerous instability and leakage at a nuclear power plant (Japans triple-disaster).

The point is, massive problems come along that far exceed the worst-case scenarios for business operations. When the unforeseen does strike, very compassionate thoughts of "I hope they are OK" take over for most who have customers, colleagues and others in the affected area. Because of the inherent relationships that credit and sales staffs build, such a reaction is natural. However, business must continue. "At some point, you've got to find a way to get your money but, first and foremost, I think you have to respect the customer;' said Patrick Spargur, ICCE, credit and collections manager with Bally Technologies, Inc. "We have to have a little empathy and compassion. We're all human beings at the end of the day, right?"

But action on the part of the credit professional in the not-too-distant future is a necessity. This is business, after all. It doesn't have to be cold or framed as all about the money, but sitting on one's hands is simply not an option if the affected customer has a large payment due or products to deliver to a creditor. Still, the response can be a helpful, flexible one, at least in the short term.

However, "short term" can be an important distinction, not to mention one with a highly subjective gray area. As Tim Bastian, ICCE, manager at Western Oilfields Supply Company, characterized it, "there is only so much you can do" and if the troubled customer really doesn't have a plan, the creditor needs to "act accordingly"

The Case for Being Flexible

When Hurricane Sandy ripped through the East Coast, it brought the kind of damage to the U.S. Northeast--notably the New Jersey shoreline and greater New York City--that seemed unfathomable based on history. Evoking similar imagery as the impact of Hurricane Katrina around the Gulf States in 2005, and to a less frightening degree, Japan's struggles in 2011, Sandy's deep impact was a reminder to many credit professionals of the importance of working on some level with customers hit hard by a natural event. Spargur said it is a standard procedure at Bally's and among other industry colleagues to offer increased flexibility upon a massive, damaging weather occurrence. "We feel like we are a partner with our customers and try to remain as flexible and understanding as possible in those times. It's one of those uncontrollable factors nobody asks for" he said. "If they have to shut the doors for three days, we'll give them three days worth of credit on the machines they're leasing from us. If it's a sales situation that was affected for a week or two, we're going to give them at least that amount time to catch up, especially if they are a good-paying customer"

California-based Mainstream Energy, Inc. was among creditors impacted by Sandy. The company was part of a solar loan program in New Jersey through PSE&G. Mainstream was responsible for installations and was paid upon successful inspection. Somewhere between seven and 10 installations were completed not long before the storm, meaning payment of nearly $150,000 was delayed. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed


An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.