Oxymorons in the credit department

Thea Dudley

Dear Thea,

If I hear the phrase “He has been a great customer with us forever. He always pays, he just runs slow,” I will scream! What is wrong with the people in my company and their attitude towards us getting paid? I am not talking about just the salespeople, either. Our owner and vice president have made those types of comments as well. They’re making excuses on behalf of our customers who choose not to pay us on time. How can I compete with my own company to get our customers to pay us on time?

Signed, Perpetually Perplexed in Panama City

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Dear Perplexed,

In credit, it is important to know when to stop arguing with people and simply let them be wrong. I compare it to being dead. When you’re dead, you don’t know you’re dead and all the pain is felt by others. It is the same when you’re stupid.

Credit managers everywhere share your pain. It boggles the credit manager mind that seemly intelligent individuals in a position to lead and make major decisions for the health and growth of a business can utter that sentence with a straight face and find it acceptable. All the while looking at you as if you are the runt of the liter not quite keeping up.

Since it is considered bad form to call people stupid (specifically people who can fire you), let’s label it contradictory logic at its finest. “Great customer” and “runs slow” is a credit oxymoron. In credit world, “great customer” equals a customer who pays on time, calls with any issues prior to it being past due, and does not use my company as an interest-free lender because they have blessed us with their business. “Runs slow” equals a customer who I have to call and gently remind them that I am somewhat patiently waiting for their payment. To me, “runs slow” means they have the potential to ease on down the road to bad debt if I do not stay on top of it.

Yes, credit people do tend to skew towards the darker side of life. It comes from spending 80% of their time with the slow pay, no pay, courthouse-bound portion of the accounts receivable. When credit hears “good customer + slow pay” we think “potential to cause harm.”

My first question to the leader is always, “Why?” Why do they run slow? What is the issue? The answer is usually some version of “I don’t know, they have always paid that way.” Have we ever asked them why they pay us “slow” (which, for the record is actually “late”)? How about getting to the root of the slow pay issue and come up with a solution that benefits everyone? How about we solve the problem?

Do they have the right payment terms they need for their account? Do they have job accounts or projects that need specific terms to set them up for success? Are they having trouble collecting their money? Is slow paying their suppliers their cashflow methodology? What is the issue that is keeping them from being a great customer?

Once you have the internal conversation with your sales rep, reach out to the customer and have that conversation. But be sure to tread with care—if you come at your customer with accusations or talk down to them, you will lose before you even get started.

Take a gentler, kinder approach. Thank them for their business. Then start your approach to the late-pay runway. Bring up a key point or two to get the conversation started. Something like, “I noticed you are not taking advantage of your discount, we really would like you to take use it, so how can we help?” Or “You have always handled your account well and we love your business, we report to XX credit agencies and I hate that this is hitting your credit report. What can we do to help your credit reflect the type of company you are?”

Those are just two examples of a super-soft approach, but let’s be honest, “Hey you are late again, and it is causing me stress,” doesn’t get any traction. The softer approach allows you to address the issue, let the customer keep their dignity and work to solve the issue. Everybody wins.

Despite leveraging all your outstanding credit manager communication skills, there are the occasions where no matter what you try, how you say it, approach it, or attempt to solve the slow pay issue, your customer will resist (blow off) your attempts and continue to pay you late.

You, and your company then have a business decision to make. Is the customer profitable or critical enough for the late pay issue to be overlooked and allowed? How late is acceptable at your company? Do you forgive the late charges or write them off completely knowing this dance will never end? These are questions only your organization can answer. Allowances based on key customer or business decisions are challenging, but a necessary risk/reward of business.

Next time you are faced with a lovely credit oxymoron resist the urge to laugh openly at the absurdity of it and turn it around. Stop arguing and prove them wrong.

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