Creditprousa's Blog

November 4, 2011

Credit and Sales …. Utilizing a Team Approach for Increasing Sales and Profit

One of the most important relationships in any company or organization is the relationship that is established and maintained by and between the Credit Department and the Sales Department.  All too often, these two integral parts of a business entity are at odds with one another rather than working together as a team.  This type of negative relationship can very much adversely impact the overall profitability of any organization.  A contributory factor in this negative relationship has to do with the typical mindset of a credit professional versus the typical mindset of a selling professional.  On one hand, inherently, a credit professional uses extreme caution when extending credit or opening an account with extended terms beyond one day.  They don’t like to gamble and frankly can be very stingy.  On the other hand, inherently, a sales professional’s primary motivator is selling the product or service without considering the risks involved in making the sale.  They are willing to gamble that the sale will be paid for and as a result will want to be very generous with credit terms.

As a business owner, totally adopting either one of these mentalities can have devastating consequences.  The best scenario and one that should be encouraged is a cooperative relationship between your credit and sales departments, working toward the common goal of increasing sales while at the same time minimizing risk.  Believe it or not, this concept is not impossible or improbable, it is very much feasible and attainable.  Each department must understand that in the case of any marginal sale, there is a need for cooperative analysis through positive dialogue.  It is a fact that most sales can actually be completed without compromising security, resulting in greater market-share, overall sales growth and greater profits.

CreditPro Financial Services, LLC can be your source to address these and many other factors that negatively impact your bottom-line.  Please call 216.402.9988 or visit us on our website, www.creditprousa.com.

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October 28, 2011

When is it time to enlist the services of a credit professional?

If you are a small business that offers some or all of your products and services on a credit basis or terms exceeding COD, you may find yourself in one of the following scenarios:

1.  You are too busy with the other facets of your business, i.e., increasing sales, marketing, managing or supervising, to devote the necessary time to credit and collections.

2.   You are uncomfortable contacting your customers to request they pay a past-due balance or to advise them that you cannot extend further credit until the account is brought current

3.   You find your efforts to collect your receivables are becoming less and less effective because:

  • Your customers have grown accustomed to you personally calling them and they have found ways to persuade you to give them additional time to pay, or worse yet, are now totally ignoring you and indifferent to your payment requests.
  • You lack the negotiation skills that are necessary to convince your customer that they must pay their account balance.
  • The quantity of accounts that require collection efforts exceeds the time that you have available in your schedule.
  • There is little or no cooperation and/or communication between your internal departments i.e., between the credit and sales department to resolve issues with existing customer sales and balances.

If any one or all of these scenarios is applicable to your particular business, a lack of action on your part will only increase the possibility that many of your accounts receivable will continue to be delinquent, or worse go completely uncollected.  CreditPro Financial Services, LLC, can help you avoid these costly situations by acting as your in-house Credit Department and intermediary to effectively collect your accounts.  Where applicable, an experienced credit professional will come to your office, review your accounts receivable aging with you, understand what is expected and professionally make all of the necessary contacts with your customers on your behalf to affect payment of the accounts in question.  You’ll have all of the benefits and experience of a credit manager at your disposal at rates far less than employing a full-time credit manager or credit team.  Contact CreditPro Financial Services, LLC today for a no-cost, no-obligation assessment of your business by telephoning 216.402.9988 or visit our website, www.creditprousa.com.

October 26, 2011

How Long Is Long Enough?

From time to time, every merchant that sells on a credit basis must make a determination whether to continue selling to a particular customer that does not pay within established credit terms.  In a good economy, it is much easier to deny the continued extension of credit to an existing customer that consistently pays late and replace them with a company or firm or individual will pay in a more timely fashion. In a troubled economy however, almost every business struggles to get new business to keep, maintain or increase their market share, much less be selective in its selling process.

Consequently, as a business owner, company president or sales director, you make must the choice to continue extend credit to a customer, or deny them the further extension of credit.  Several factors should be included in your decision making process, but one of the most important if not THE most important factor to consider is whether you are making enough profit on your particular customer to absorb the costs for the extension of credit?  For example, a customer that owes $10,000 for a product or service translates into a cost factor to you of $600.00 per year, $50.00 per month, or approximately $1.65 per day at a nominal borrowing rate 6% per year until the money is paid:

($10,000.00 x 0.06) = $600.00 ÷ 12 = $50.00 per month

 

OR

($10,000.00 x 0.06) ÷ $600.00 ÷ 365 = $1.65 per day

Not a big deal right?  Wrong!  Let’s look at that same example using 50 or 100  accounts (a pretty good customer base for a small to medium sized business).  Using that same outstanding balance of $10,000.00 for 50 or 100 accounts the expense to extend credit increases to an annual rate of $30,000.00 or $60,000.00 respectively!

To increase cash-flow, minimize your expense and collect your receivables in a more timely manner, you know you need the services of an experienced credit professional. CreditPro Financial Services, LLC, has competent credit and collections professionals available to provide its vast array of services to you on an as-needed basis for less  than it would be for you to employ a part-time clerk.

Please call 216-402-9988 or

visit us on our website, www.creditprousa.com

April 27, 2010

A STRONG CREDIT POLICY IN A WEAK ECONOMY

The weaker the economy, the stronger your credit policy must be.  You’ve probably heard the saying  “…a sale is not a sale, unless it’s paid for…it’s a gift.  This couldn’t be truer today given our tough economic climate.  Desperation to make a “sale” oftentimes interferes with making the right decision to either deny credit and insist on COD terms or in the alternative getting a large down payment to minimize the amount of credit extended to the prospective customer.

To substantially reduce the potential that you will not be paid for your product or service as a result of extending credit, you truly need to take some preliminary and necessary steps.  First, if you believe you want to extend credit, you need a good credit application that not only provides some detailed information about your prospective customer, but also contains language that will bind that customer to your payment terms with his/her signature.  Second, you must thoroughly investigate the information provided by the prospective customer on the credit application.  Only after you have obtained complete information from your prospective customer and have investigated and verified it, can you then make an informed decision to either extend or deny credit to them.

Having said all of this, and although these are steps in the right direction, if you don’t possess the training or knowledge that are necessary to make an educated decision based upon the information you have been provided by the prospective customer, your exposure to non-payment could still be substantial.   Consultation with an experienced credit professional to assist you in making the correct decision is highly recommended.   CreditPro Financial Services, LLC, employs skilled and knowledgeable credit management professionals from varied industries to help you.  In addition to its many other products, CreditPro Financial Services, LLC can provide you with proven credit applications and guaranty instruments for your use. Once you have obtained the desired information from your prospective customer, CreditPro Financial Services, LLC can investigate and verify that information, evaluate their credit-worthiness and recommend the extension or denial of credit on a case-by-case, as needed basis, thereby eliminating the need to enlist the services of a full-time credit manager or credit department.    Make your company more profitable by properly extending credit through the use of the proven products and services provided by CreditPro Financial Services, LLC.  Please call 216.402.9988 or visit us on our website, www.creditprousa.com for more information.

MAINTAINING A STRONG BUSINESS RELATIONSHIP WHILE HELPING TO MINIMIZE DSO

One of the most important things to remember in establishing and maintaining a strong credit policy is by maintaining a good working relationship with new and existing customers through constant communication.  This practice begins with a company’s sales department and is re-enforced by the company’s credit department and finally by the company’s owners.

It is of the utmost importance that new customers are contacted shortly after placing their first order to determine if there were any difficulties with order placement or product receipt, and that the order/receipt process went as they had expected.  Once it is determined that all went well with the customer and they were satisfied with the product or service, the call can be closed with a reminder of payment terms.

The close of the call could go something like this “…I am pleased that we were able to satisfy your business needs Mr. Johnson.  As a reminder, our payment terms are ——- and we look to receive your check for the balance by (insert date), Thank you very much for allowing (insert company name) to be of service to you.

This telephone call accomplished several things:

1.)    Did the customer receive his merchandise or service?

2.)    Was the merchandise or service satisfactory?

3.)    Was the merchandise or service received in a timely fashion?

4.)    Did the customer have any questions?

5.)    Eliminated disputes or deductions based upon faulty product or faulty service.

6.)    Re-established payment terms.

Diligence and follow-up are essential in maintaining strong relationships and minimizing DSO.  The experienced staff CreditPro Financial Services, LLC, will be pleased to provide this service for you or train your in-house personnel to minimize risk and maximize return. Please call 216.402.9988, or visit us on our website, www.creditprousa.com for more information.

DO YOU NEED A CREDIT PROFESSIONAL – YES!!

As a credit professional with over 25 years of experience in consumer and commercial credit, I highly recommend to small businesses that they enlist the services of a qualified credit management team to not only help them make sound credit granting decisions using proper pre-investigative techniques, but also to increase positive cashflow by collecting receivables in a more timely fashion.

You wouldn’t loan someone you didn’t know a sum of money without knowing if they had the ability or willingness to repay would you? It’s hard to believe but this careless practice is considered “normal” by smaller enterprises that cannot afford to pay the salary and associated benefits to a full-time credit expert or credit team. They simply gamble with their unpaid receivables hoping that someday they will be paid.

Let CreditPro Financial Services, LLC help your small business minimize credit risk while maximizing its return through the use of sound and proven credit granting techniques. In addition, CreditPro Financial Services, LLC can assist you in the collection of your receivables and in the filing mechanic’s liens and affidavits for claim. Best of all, you only pay for services when needed, which SAVES YOU MONEY. Please call 216.402.9988 or visit us on our website, www.creditprousa.com for more information.

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