Five questions to ask a credit, collections, or finance company

As a building materials supplier, you want to capitalize on the economic recovery and strengthen your financial health. However, you may be a bit gun shy from past choices, bad debt exposure, or credit decisions that could hinder your cash flow and ability to grow. With the economy improving, it’s a good time to consider using a company that can help you make your credit program a growth engine instead of a drain on cash or constraint to sales.

As you explore your options, these questions can help you determine the right fit for your needs.

1. Do you understand my business?

You want to work with people who really know the building supply industry and speak your language. And when it comes to credit, collections and finance, you want to work with a company that understands your unique business drivers. So as you look at companies, make sure you ask:

  • How long have you been in business?
  • How deep is your experience with building materials suppliers and professional customers?
  • What about references and testimonials?
  • Are you actively involved in and well thought of by industry associations and forums?

2. Do you support my goals?

From growing sales and reducing costs to minimizing risk— chances are you have specifi c goals you want to achieve. Keep those goals in mind when you look at the services offered by different kinds of companies:

Billing companies

Can save you the time and hassle of billing and reconciliations, often moving billing and payments online for you and your customers.

Collection agencies

A good way to minimize your losses, recover cash and free-up time spent on past-due accounts.

Factoring companies

Ideal for a one-time cash infusion that can reduce your risk exposure through the discounted purchase of your receivables.

Banks

Focus is often on financing for your long-term investments and lines of credit to cover short-term cash needs.

Professional credit management services

Give you guaranteed payments on 100% of sales, protection from risk and full credit, billing, collection and customer services. Some services, like BlueTarp, also provide sales incentives such as larger lines, extended terms and rewards programs that help you capture new sales growth. 

3. What kind of business growth can I expect?

Factoring and collections companies can give your cash flow a boost, while billing services may improve the timeliness of customer payments. If you’re looking for predictable cash flow over the long-term, and incentives to win new pro customers or encourage current customers to spend more, you may want to consider a professional credit management service.

The end-to-end service approach offered by companies like BlueTarp supports your business growth in three ways:

  • Offers longer terms, larger lines and rewards programs so you have a competitive advantage and more ways to boost sales
  • Guarantees payments on all sales, at the frequency you choose, so you can invest with confidence
  • Protects you from credit risk, and provides expert customer service, billing and collections services, so you can focus on your  business and spend more time with your customers

4. Do you reduce my credit risk?

Only factoring companies and professional credit management services will actually take the risk of non-payment off of your books. Factoring companies will buy a portion of your receivables but take a bigger fee. And unless you do it repeatedly, it’s a one-time benefit. A credit service charges a small percentage on every sale and offers full risk protection on current and future sales. 

A professional credit management service offers full risk protection on current and future sales.

You can also choose to offload the time and effort of daily credit decisions to a professional credit management service. Many offer dedicated teams that monitor your customers’ buying behaviors and identify at-risk customers early. At the same time, credit lines for good customers are proactively increased to encourage spend. Professional credit analysts provide this level of support as part of every BlueTarp program.

5. How will my customers be treated?

You want your customers to be treated the way you treat them. A billing company may provide great billing service but is mostly focused on transitioning customers to an online payment platform to automate interactions. Collections agencies differ widely in their approach, and may not understand the reasons why professional customers sometimes have trouble paying on time.

This is one area where professional credit management services are significantly different and excel. Since they typically charge a small percentage of every sale, they use their credit expertise to encourage more spend from your customers. This also means that their customer service, credit and collections teams are supportive of the unique challenges that pro customers face and provide flexible solutions that keep them on the program. And with a company like BlueTarp, you can customize payment terms and credit limits for each customer and offer the credit service as a co-branded offering.

To fully take advantage of the improving economy, spend the time to understand the differences among the various financial services companies. Factoring, billing, collections and credit service companies all have a distinct role to play. As you weigh your options, consider if you’d benefit from a service designed to boost sales growth, provide long-term cash flow and protect you from risk. If your answer is yes, consider how BlueTarp can help.

About the Author

Tracey Richardson-Newton

Tracey serves as Vice President of Credit Risk Management and Customer Operations, responsible for complete oversight of the credit risk management function as well as credit and collection operations.

More Content by Tracey Richardson-Newton

No Previous Articles

Next Article
Tips for Managing Credit: Published in LBM Journal
Tips for Managing Credit: Published in LBM Journal

Learn best practices to collect from late customers and still keep them happy.