Tips for managing credit: published in LBM Journal

The Real Issues article (p.24, January LBM Journal) titled “Credit and Collections” opened with a question dealers wrestle with regularly: How do you collect from late customers and still keep them happy? Figuring that out is more than just a passing interest to me. My business depends on it. Let me explain. BlueTarp manages the trade credit programs of thousands of building supply dealers. Although our dealers design what terms and treatment their contractors get, they depend on my team to represent them well. After all, if a dealer angers a customer during a collections call, they risk losing that customer. If BlueTarp angers their customer, we risk losing all of the dealer’s business. Thankfully, angering customers is a very rare occurrence. Over the last 16 years, we’ve learned a tremendous amount about collecting payment and preserving strong relationships. Dealers can replicate our success if they follow this advice:

Know if the customer is late or if they are in trouble

Consistency is key. We’re far more comfortable with someone who always pays us 30 days late than a one-time payer who is suddenly 60 days behind. It’s also very helpful to pull commercial credit three times a year on everyone to see how it is trending. Worsening payment trends at other dealers, plus erratic performance with you, is a tip that the contractor is under strain. Your collector will know what to expect if they know a contractor’s ability to pay and their personal mood are under stress. You can also cut through the clutter if they are in trouble and need to talk through a settlement or payment plan. 

Assume positive intent until proven wrong

Our approach is to assume that everyone wants to pay promptly but something is getting in the way. This means our collectors are inquiring what they can do to help. Often, late payment results from a bookkeeping error, an invoice that got lost, or a situation where the contractor needs data on the late purchases. If the lateness is intentional, they know they are late and your pleasant offer to help is a polite reminder that you know they’re late too. This is effective for most situations.

Collector as hero, not punisher

When polite reminders aren’t working and the contractor is severely delinquent, delicately introduce consequences if you cannot resolve the situation. Try positioning the collector as the hero trying to help the contractor avoid these consequences instead of approaching it like a punisher. “What can we do to help avoid your account from getting placed on hold?” “I’d hate to see your company’s credit rating take a ding.” It makes a world of difference how a contractor responds if they feel the other person on the call is on the same side of the table as them. 

Train your collectors well 

We train our collectors as extensively as dealers train their sales reps. You should too. We drill on communicating empathy and respect, even in situations where the contractor is not demonstrating the same. If you visited us in Portland, Maine, you’d see a lot of our collectors smiling. It’s very hard to not be pleasant if you have a smile on your face. Why work so hard to get customers and not train well for how to keep them when these situations arise?

These best practices have proven themselves many times over the past 16 years. By extending respect and expecting future payments will be on time, we are asking them to respect us and the dealers they buy from. It’s a faith that is rewarded more often than you might think.

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