“LBM Talks” hosts top professionals from different sectors of the lumber and building material industry to share their expertise, with a heavy emphasis on practical, tactical strategies to help you serve your markets and grow your business.
Join LBM Talks host, Thea Dudley, as she brings her razor-sharp expertise to dissect trends, regulatory changes, and offers real-world advice for credit professionals. In this episode, Thea talks about how every credit manager she knows has at least one “friend of boss” or “friend of sales” account that never gets paid. This episode will remind you why friends and credit don’t mix and how to pass these “friends” off to your credit manager.
Subscribe and stay up to date as we add more experts on key topics. Listen now and subscribe via your favorite podcast provider below:
Prefer to read about it instead? Take a peek at the transcript below for Episode 5: Friends & Credit Don’t Mix
(Editor’s note: Transcript is AI-generated and may include some errors.)
“Hey there everyone. Welcome to another episode of LBM Talks: Credit. I am your host, Thea Dudley, also known as the Credit Overlord, and I am so glad you’re here with me today, because today we’re going to talk about friends. Friends are on my mind a lot, mostly because I get to see evidence of friendship on my AR every time I look at it. And you know, friends are a good thing. You know, we always consider having more friends better than less friends. But you know, depends on how you define friendship. And you know, we in this industry are the absolute champs of allowing friends to leverage that friendship to an account that has balances that we get to carry around forever, and I get to look at every single week when I pull the AR. So past due balances not, Hey, I just got this. It’s 30 days that I’m paying you. But every credit manager I know across the country has at least one fob or FOS account on their AR, and it’s the same conversation.
Oh, so if you don’t know what fob or FOS are, FOB is friend of boss and FOS is friend of sales. So everybody has these, at least one sitting on their AR, and there’s the eye roll, yeah, that’s a friend of so and so, so and we’re all just over it because you’ve got people that they vouch for somebody. I’ll have a salesman come in and say, Now listen, this guy’s a friend of mine, so if you could just see your way to giving them an account, I guarantee he’ll pay you. Do ya? Do you guarantee it. How about you sign this piece of paper? Because you’re going to guarantee it. Now, that usually doesn’t go over well, you know, people push back. They’re like, now you’re just being ridiculous. Am I? You’re the one that said he was okay guy, because, see, I looked up the definition of friend, and you know what? It didn’t say. It didn’t say one sided, abusive relationship. So we tend to lump everybody we ever met in this industry into the friend category.
Somebody that you went to school with in college 30 years ago does not qualify as a friend. They might have been your friend when you guys were hanging out, you know, go to a kegger or something, but you don’t know how they pay their bills. And even if this person is somebody that you are friendly with, nobody is sitting around having a beer saying, “Let me tell you about my life right now, I am so past due on all my bills. You know, my house is about to be repossessed. You know, I’m getting foreclosed on, whatever it is. But if you just you don’t see your way to lend me about $15,000 in materials that you can ship out, I can finish this job, and I can set all the world back to right.”
That’s not how this works. I don’t want your nonpaying friends sitting on our on our accounts receivable forever. So I have some amazing friends, but I wouldn’t lend money to them. I have family members I wouldn’t lend money to because I know my friends and I know my family members. If I lend one of my friends a garden hose, I know they are never going to remember where they got this garden hose. So it is basically a donation. It’s important to me that I get it back, but their needs are met. They forget about it. Same thing with the friendship and shipping out materials. So as a credit manager, I have no friends on my AR. Everybody falls into two categories, paying me, not paying me.
I have people that I’ve come to really like that I work with, that we sell to that. I’m like, yeah, they’re, they’re a great company. They pay their bills, and then I enjoy working with them. You know, I like some of them that are even horrible payers. I like them. I think they’re nice people. They might have a great sense of humor, but they pay me horribly. So if they come in there, they’re very athe. I can, can I know I’m past due by like, 60 days, but I just need another five grand to finish this.
If you’re pulling on the friendship string, that one’s not going to get you anywhere. So those horrible guys, I keep on much more of a tight leash. I anybody that pretends that they’re or proclaims, suddenly I am a friend of the boss. Really, you’re a friend. Well, I know that you’re going to come with the, you know, with the warning label that says, Yeah, I’m going to have to chase this money forever, because you are not going to pay us. Because your definition of friend, and my definition a friend is two totally different definitions. So this practice just needs to stop. Just stop. I mean, I get why it happens. Owners or sales people, you know, they want to be nice. They want to help people out there. They’re not geared to say no, and you hate to let people down. And when someone comes to you, and they’re, you know, little hat in hand, and they’re like, Can you just help me out? Okay, I’ll help you. I’ll smooth it over with the credit department.
The minute I see, you know, get a phone call, or see somebody’s head pop in the door, and they’re like, Yeah, can I? Can I talk to you for a minute now? Get out. I don’t want to talk to you. Just go down the road, because you’re going to bring this fob account, and I am going to chase it forever, so we’re going to do the wrong thing for the wrong reason, and now we have bad debt. So when we write this off, can we all remember that this was your buddy, this was your good friend. And let me just clarify, we’re selling some dude that you went to college with that we really don’t have any idea why we’re doing this, except he’s your friend. Yeah, sweet. That makes complete sense. Where I’m going to get behind that. So owners, presidents, you don’t have to say no, but you can send them over to your credit manager and let us have the conversation with them, because we’re going to be able to slice and dice that conversation several different ways, and if it makes sense to give them credit, we will. But if it doesn’t, then it doesn’t do any good for us to be like Habitat for Humanity, and we’re just giving things away for free.
If they don’t warrant a credit line, we don’t give them one. The tough conversation happens when credit says, Oh, hell no, this account got overwritten because you’ve known them for a long time, or they’ve been a customer for years, and now, you know, we’ve just always let them pay like that. But now we’re, we’re carrying an interest free loan for, you know, however long. Yeah, that’s cool. That’s cool. We’ll just let it go. It’s, you know, credit decisions based on personal relationships, usually emotion based are never a good idea. They’re not data driven at all. People don’t usually come up and tell you they have pass through child support, or they’re in the middle of a divorce, or they’re, you know, their company is struggling. They just want to get to whatever it is they need from you so they can get out the door. And the excuses that get made for friends go on and on, and they are super fascinating. I actually enjoy hearing some of them, because you just sit there with the same face, you know, with your cup of coffee, going, oh yeah. I wonder how long the excuses are going to go on, or how far we’re going to get with this. So every time one of those show up on my AR, one of the one of the sweetest, saddest moments is to walk up to that salesman or that particular owner or company president or, you know, wherever they fall in the food chain, it’s like, Hey, I know you stuck your neck out for this, you know, swell guy that this friend that does not reciprocate. But do you think you could call your friend and have a come into Jesus with meeting with him because we’d like to get paid or, Hey, so is, is this your friend? You know, the guy that’s not paying us, the one that’s been, you know, circling the drain here forever, and he’s, you know, out 150 days now, but you won’t let me do anything to him, like send him to collections, because he’s a friend.
Okay. Again, I just want to ask him, you know, how long have you really been in this abusive relationship? And why don’t you blink like, four times if you need my help to get out. Now, I realized that at this point, I am dancing on the fine line of genius because I think I’m witty, and that they’re also going to find me witty. And the unemployment line, because typically when people make a bad decision and you rub their nose in it, they do not find you entertaining or amusing. So how about if we’re going to do that, if you absolutely have to sell your friend. What if we just set up an account in the system called buddy? We’ll just call it buddy, and then we can label it, you know, under, you know, buddy street address of donations is, you know, if that is that too snarky, because if it is, we can dial it back. We don’t have to put donation on there. But let’s just stop the enablement if, if we’re going to help somebody out that way, either make the decision to give them the material or gently steer the customer, longtime friend, longtime customer or newbie, just hand them over to your credit manager. Hey, you know what I hear, what you’re saying, I’d love to help you out. You know, we do have some protocol. Let me get you over to our credit manager, and she can get you a credit application or have that conversation and let me do my job.
Repeat after me. Friends and credit don’t mix. Just repeat after me. Friends and credit don’t mix, and then we won’t have to have the enablement and the tragically past due stuff out there on our aging Okay, so now that we have talked about friends and that you can have as many as you want, just don’t lend them any money. This wraps up another episode of LBM Talks: Credit, I am so glad that you joined us. Hope you join us again. We come out every other Tuesday on Apple and Spotify, and we will catch you next time.”
