Murphy's Law

In the spirit of St. Patrick’s Day, I want to pay tribute to the guiding influence of credit, obviously originated by an Irishman, Murphy’s Law, (an arguable point, but it sounds Irish never the less). This is the concept that if something can go wrong, it will go wrong. All credit professionals know this and it is wise to never forget it.

A typical example of Murphy’s Law in the credit environment is the personal guarantee signature. The one time you don’t get one is the time you’ll need it the most. It never fails. The policy is: when a corporation is applying for credit always get a personal guarantee from a principal, preferably from the President. Corporations are formed to protect the individuals from personal liability; obviously they will resist attempts by creditors to make the principals liable for their debts. A prudent creditor will insist on the guarantee unless the applicant can prove to be a stellar credit risk and in today’s world that would be a rare exception. What happens? The one not quite stellar applicant who talks the credit manager out of requiring the principal signature on the personal guarantee will default down the road, file bankruptcy leaving the creditor holding the proverbial bag.

In construction related credit, Murphy’s Law rears its ugly head when in those states requiring a preliminary notice in order to establish the right to file a lien later, the one job that goes sour, doesn’t have a preliminary notice.

A common problem in some departments is the missing credit application. It is a strictly enforced policy to have a credit application on file for every single customer, but when a customer disappears of the face of the map, invariably and inexplicably, no credit application can be found anywhere.

Most government agencies and many large companies require purchases made with a purchase order. Hence, Murphy’s Law strikes again when the one invoice that a usually reliable customer doesn’t pay, doesn’t have a corresponding purchase order.

Probably one of the worse Murphy’s Law scenarios occurs during litigation. You’ve already spent a fortune on what appears to be an iron clad no doubt about it sure thing win when the other side throws you a curve that threatens to derail the entire case. Worse, usually, they’ve discovered something you’ve overlooked.

You cannot beat Murphy’s Law. You can only live with its inevitability. However, Strategic Credit Management Solutions can help you with your systems and policies so that you are better protected from the exceptions. Give us a call or e-mail us at patrickpowers@sbcglobal.net. And see our website http://powerscredit.com/ for more information.

In closing: "In Ireland the inevitable never happens and the unexpected constantly occurs."
~~By Sir John Pentland Mahaffy.~~