I am new to credit management in this industry. My previous credit experience was in another industry that was pretty dry when it came to extending credit. I now deal with a whole new level of clients, many of whom are considered “high risk”. They are either cash on delivery or half with balance on delivery. These customers take a lot of time and energy. Why do we agree to do business with them? When I question my boss or our sales reps, I get a long dissertation on the industry or an eye roll. What am I missing?
— Risky business in Highland Park
Dear Risky Business,
If wishes were horses, beggars would ride. Same thing with credit and customers. If every customer showed up to your business on a shiny white horse, fully armed with their even shinier credit history, where’s the fun in that?
I don’t know what industry you’re from, but it sounds like the land of unicorns and rainbows. An industry where credit is cut and dry? Where each customer is solid? No COD, negotiating how you’re going to get paid – what have you been doing all your free time and why did you leave that proverbial promised land of credit?
We do business with them because, for better or worse, without that slice of the business, some of us wouldn’t be as profitable, wouldn’t move as much product, or even keep our doors open. .
If you’re dreaming of a portfolio full of clearly legible customer credit applications, with stellar credit reports, flawless financials, and 850+ credit scores, get out there. You are now in credit management in the construction materials space, supplemented by a parallel construction order.
I think you see it all wrong. Don’t get me wrong, high-risk clients require more work. It takes a lot more effort to find solutions, alternatives, and ways to justify lines of credit to sell to these super marginal customers, but who doesn’t like a challenge?
Some of these customers are the nicest, but they couldn’t pay in time to save their lives. Some have the best intentions, but nothing seems to go as planned, and others are outraged and can’t believe you won’t give them credit. All still need product and can add to your bottom line. They are going to buy somewhere, why not from you?
The art of the deal awaits you. Depending on your risk appetite, the flexibility of your business, and your own creativity, you may find a way to say yes. It might not be the “yes” of your dream customer (or sales rep), but you can find ways to sell to them.
You have: COD, half down, half on delivery, small micro-managed lines of credit, very limited terms, personal guarantee, inter-company guarantee, joint check, preliminary lien notices on projects. Lots of options – not all appreciated, but options nonetheless.
Stop wishing for the credit pasture you left behind, saddle up for the rodeo that’s your life now.