One of my clients has a credit manager who is a very nice, honest, and forthright individual. I have known this credit manager for the past few years and from time to time I am asked to come out and assist him with some consulting project or issue.
Last week when I was out there having a meeting with this credit manager, one of the sales administration staff brought over a new account that needed to be approved for credit. The new customer credit application had been filled out and the D&B report had been obtained as backup to the application for the credit manager’s review. The credit manager showed me the company and when I saw the name I said, “Wow, congratulations on getting this company as a new customer, they are wonderful to have”!
The credit manager looked at me strangely and told me to “take a good look at their D&B report and to note that they have some law suits pending against them”. I read them but also pointed out that this company, as a global corporation, like many other multinational companies is going to have several business transactions that may end up in court. “It’s par for the course”, I told him. I also pointed out that according to the D&B report this company had a $1 million credit line with a Paydex score of 70 and that in view of the request to purchase about $2,500 in parts from his company, I feel that they are not a credit problem. In addition, and more importantly, from the point of future business with this very well known company, best not to rock the boat.
The credit manager however was adamant about the law suit situation on the credit report by asserting that, “large or small, law suits are a warning sign and in accordance to our credit policy, we have to treat every company the same and in this case we’ll have to request cash in advance”. I very gently mentioned to him that the beauty about credit is that every company, like every employee, needs to be evaluated on a case by case basis. If the new account was a very small company, with a very low Paydex score, with several pending law suits, then I could certainly understand selling on a cash in advance basis. However, when a well known publicly traded company with a $1 million credit limit is only requesting $2,500 then I think we can set aside the law suit idea.
The credit manager sort of agreed and also looked a little awkward. He mumbled something to me about other accounts that may have to be reconsidered.
As a credit manager myself who is always on the look out for any details on a customer that could be red flags, I have a mantra, “Do nothing unwisely to impede a sale”. In other words, knowing how difficult it is to get new customers and understanding the challenges in retaining customers, a credit manager should never do anything unwisely or unfairly that would impede the sales process.