Magazine article Business Credit

Credit "Survivors"

Magazine article Business Credit

Credit "Survivors"

Article excerpt

It is interesting that media focus has been on reality-based "survival" shows, for the last few years have certainly been sink-- or-swim for many businesses. There are many options you can use to help your customers understand the attributes of survivors. Credit managers today can play a large role in helping their customers understand issues that will help them be successful. Strong businesses are built with good credit. Here are five key points that you can bring to your customers' attention that will help them achieve a better credit standing.

1. Scrutinize Purchasing

Every dollar of assets a firm has on its balance sheet requires a dollar of financing-whether it is trade debt, bank debt, or equity. Assets are a lot easier to find than financing, so it is important to minimize the amount of assets. Inventory should be avoided by outsourcing with suppliers who provide the best logistical support. Improved pricing can be obtained if purchases are aggregated. Vendors frequently offer perks to employees for emphasizing vendors' products. Credit survivors will put controls in place to be sure those perks are either reflected in the prices paid or given to the headquarters for corporate use. Assess the hidden costs in the lowest price. Premiums paid to one supplier over another are frequently a lower cost alternative due to product or service quality, customer satisfaction, and ease of doing business. By scrutinizing their purchasing habits, the overall cost of assets and amount of assets purchased can be reduced. This will free up liabilities that might be needed to support growth or to fund a major initiative.

2. Amuse Creditors

Businesses that play "catch me if you can" will usually fall victim to credit managers with long memories. Communication is the key to amusement. By using e-mail, it is easy to set up a distribution list of credit contacts to keep updated with information. Despite the perils that even the largest of the public accounting firms have faced in recent months, financial statements continue to represent the single best method to evaluate the financial strength and health of business. But the public accounting situation highlights the fact that customers need to prepare and share financial statements even more frequently with their creditors. The days of supplying only year-end data are over. Customers also need to make their creditors aware of management changes, ownership changes, mergers, and acquisitions on a timely basis. Businesses should get to know the internal processes of their suppliers and should be sure the suppliers know their processes.

3. Torment Debtors

Tough times require a tough stand. Not everyone is born to be a good debt collector, but it is important to remember that once you have done your part, your customer should do his or her part. Sharp businesses develop a route of escalation for dealing with customers on collection issues. They find a process that works, and they stick with it. If collection matters can't effectively be handled internally, then outsourcing of the function should be considered. There are a number of firms who specialize in everything from late stage accounts receivable collection help to full credit extension and collection handling from day one. Most of all, your customers need to know when to pull the trigger on a customer and be willing to terminate the relationship with extreme prejudice. …

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