Giving Credit—Where Credit is Due
Ensuring Better Credit Relationships with Vendors
by Paul Bieber
Let’s discuss paying bills to fabricators and distributors. It’s easy: pay every bill on time. Your vendors will love you and give you great service. I am very sure this is what 99 percent of you do, but for the sake of the other 1 percent, let’s explore options.
Credit and collections managers have the toughest jobs in business—they never call with good news. I used to get complaints about one of our credit managers. He was relentless and uncaring. I simply asked the complainers, “Would you want him collecting your past due accounts?” and I always heard “Yes!” That’s the point.
Credit relationships are based on direct history, references and negotiation between you and the credit manager. There are three components of credit:
• The credit terms;
• The credit limit; and
• The days aged.
These are basic whether you are a customer or vendor.
No one has to give you credit—it is not a constitutional guarantee. It used to be that the owner of the supplier would look you in the eye and, based on that two-second interview, would or would not give you a small line of credit. Today, the best plan is to establish credit before you purchase from a vendor. Meet with the credit manager in person or, if necessary, by phone. Let him or her know who you are, what types of products you will be buying and the amount of the credit line you will need.
Every supplier will have you fill out some sort of customer credit application. Do it promptly, neatly and completely. Give references in the glass and metal industries that will reflect positively about you and your company. Call your vendors and ask them what credit reference they would give you. If it is not a great reference, don’t use it. You would be amazed at the number of bad references I have seen. Not only does a bad reference reflect poorly on credit possibilities, it may also show undesirable business capabilities of the potential customer. If you are on COD with someone, but are reliable when it comes to having the checks ready and they don’t bounce, that is a good reference.
Most vendors have a personal guarantee as part of their application. We used to look at a new business and, if the owner wasn’t ready to personally stand behind the business, we wouldn’t either. In your meeting with the credit manager, sign for the account and ask if you can change from secured to unsecured in a year. Your accountant and lawyer will tell you not to sign personally for credit. They are right, of course. But they are not trying to purchase glass on a wholesale level, and this may be what it takes.
All vendors look for a bank reference. Offer the name and a direct phone number of the bank officer with whom you work the most. If you don’t have a one-on-one relationship with your bank branch manager, cultivate one.
Just as you see credit scores on TV, business-to-business operations have the same thing. Dunn & Bradstreet (D&B), for example, is the largest player in this game. For us, if an established business had a good D&B rating, this was an automatic open account. We still asked for the application, as it helped us set up computer information, but the credit part was now a shoe-in. The next time D&B visits you or calls on the phone, give as much information as you can. It will help you.
In the next column we will talk about the various credit terms in the glass industry.
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