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Getting started in a lumberyard credit department

Thea Dudley

Dear Thea,

What is the best advice you have for someone who is relatively new to credit management in the building material space? Is there some magic bean to help me get a handle on my accounts receivable immediately? I started with a company that had no official credit person, so I am struggling on many levels. Any insight would be appreciated.

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— New Girl in Nevada

Dear New Girl,

There are two words to learn about credit management in the LBM space: 1) Damage, 2) Mitigation. Damage mitigation is reducing the severity, seriousness, and pain of something. That something is your accounts receivable portfolio. Here are three things to do now:

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  1. Get ahead of it. Review your entire accounts receivable and break it into categories:
  • High risk—these are the customers that are always squeaking by and likely to not make it.
  • Moderate risk—runs slow but pays; will most likely make it through this.
  • Lower risk—usually pays on time.
  • Wild card accounts—tied to projects with lien or bond rights.

Create an action plan for each of these categories and have your leadership, credit, and sales teams all on board. There are absolutely going to be some bankruptcies and some projects that slide into litigation—we are already seeing it.

Make sure you have consistent messaging on how you are approaching your customers. Is everyone on your team on the same page with the same message? Are you prepared for the conversations? Discuss these messages with the credit and sales teams.

  1. Don’t lose your lien/bond
  • Serve your notices and bond claims and file your liens sooner rather than later. Get the requests to your lien service or attorney early so they can be submitted early.
  • Some County Recorders offices still may not have resumed walk-in service but are processing e-recordings or mailed and over- nighted service.

Your smartest route is to continue (or start) to preserve your lien rights, following up on suit deadlines and not waiting until the last minute. Time is not on your side with lien rights. Hold accounts to the credit line. If they’re past due, then stop shipping until you have a solid plan in place for payment. Solid plans are not made of empty promises.

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  1. Own the communication. If you are waiting for customers to reach out, you will be waiting a while. You are likely not foremost on their minds, but you can make it better for you both.
  • Set the tone. Be calm, confident, and know you can work through this.
  • Avoid “free pass” phrases such as “don’t worry about it.” That is all the customer will Everyone is under pressure and having challenges. You must have honest communication when dealing with the account.
  • Listen to what the customer is What is their plan? Be prepared to ask questions and sometimes point out the pitfalls in their plan.
  • Pull the trigger on liens and bonds. The hold- up is usually fear of upsetting the customer and losing them. Understand if you lose your lien rights and have not been paid, your only recourse is to sue your customer and you lose them anyway. Explain to your customer why this is good for both of you.
  • Have a toolbox. By having solutions and conversations with your customer, become a resource for them and help yourself get paid.

You can be understanding and empathic; but be smart about it. Think of customers like your kids. Sometimes it takes tough love to raise them right, and sometimes animals eat their young.


With more than 30 years of credit management experience in the LBM industry, Thea Dudley consults with companies on a wide range of credit and financial management issues. Contact Thea at theadudley@charter.net

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