What the Ads Don't Tell You

This was taken from an actual ad on Career Builder:

Description
Accounting Options is currently assisting one of Orange County's largest growing distributors in their search for a experienced Credit Collections Analyst. In this position you will be required to perform the following functions:

• Collections on past due accounts
• Account analysis and reconciliation
• Work closely with sales department on client credit and order status.
• Work with internal departments to resolve disputed items or accounts.
• Analysis of aging report.
• Ensure that DSO goals are met.
  

Requirements

1+ years credit and collections experience
Accounts receivable experience
BS/BA in Accounting or related field a plus
Excellent written and oral skills
Ability to work in a fast paced department
Ability to communicate effectively with both external and internal clients

For immediate consideration, please e-mail your resume

As a public service, I will freely decode the hidden and insidious messages hidden in this typical want ad for an A/R Collections Clerk or as it is also called in my sample ad, a Credit Collections Analyst. It is a position in Irvine California paying $15.00 to $17.00 and hour. That’s $600 to $680 a week, $2,947 as month or $35,360 a year tops. In other words, it is entry level, for someone just starting out in the credit / collections profession.

Here are what the requirements really mean:

Collections on past due accounts
Note that the ad does not define past due accounts nor does it tell you the size of your past due portfolio and it fails to detail how you are to go about the task of collections. Will you be sending out a series of increasingly threatening letters? Will you be required to call a quota of accounts each day and will the required number of calls be attainable?

Account analysis and reconciliation
When this is the second most important function, it may mean the company is having problems with cash application and most of the customers’ accounts are a mess. Therefore, before you can make an intelligent collection call you will first be required to unravel all of the erroneous entries that have so distorted the true picture it may be impossible to collect the full balance.

Work closely with sales department on client credit and order status.
Since this is the third function in the hierarchy it indicates a hostile credit and sales environment. You will have aggressive and eager, commission sales reps making a lot more than your $15.00 an hour, who want their orders released right this moment and if they don’t get their way they won’t hesitate going over your head to the sales manager, who believes past due is no excuse to hold orders, particularly when the account is a mess because of the sorry state of cash application.

Work with internal departments to resolve disputed items or accounts.
This tells me that cash application is one of the “internal” departments that you’ll have to do battle with in order to get the accounts back in shape. Another internal department handles credit memos and adjustments and since it takes so long to get a credit issued the customers are withholding payments until they get the adjustments they need and that’s just another reason why the accounts are such a mess.

Analysis of aging report.
What kind of analysis is expected of a $15.00 an hour accounts receivable clerk? This is a code for being required to explain to the boss why all of the accounts on your aging have not paid yet.

Ensure that DSO goals are met.
This is great. For $15.00 an hour, you are supposed to ensure, that is guarantee, that what ever the DSO expectations are you will meet them. That means, you, a lowly entry level clerk are responsible for the total accounts receivable and sales of the company and that when applied to the formula they will be within the required days. Good luck with that.

When I see ads like this I wonder if there is a retention problem at the company. Clerks come in, beat their head against the wall, fight with sales reps and clerks in cash application or accounting all day, are berated for not meeting collection or DSO goals and after awhile say, forget this and leave.

This is where Strategic Credit Management Solutions can help. We know credit departments, their systems and procedures. Much of what seems beyond the control of an analyst are dysfunctional processes. We can help. We can analyze your current functions, see where the flaws are and make recommendations. We can help train the staff in effective revenue procedures and we will follow up later to see how you are doing. Our goal is to help you create competitive, productive departments in which the clerks are motivated and happy. See our website, http://powerscredit.com/. You can e-mail us at patrickpowers@sbcglobal.net.

Your comments are welcome.

How to Extend Your Payables

I’m channeling Abbey Hoffman or Jerry Rubin and feeling a little subversive. I thought I’d turn the tables and describe how you can delay payments to your creditors based on what I know about credit management.

Negotiate longer terms. Everyone is doing it. The largest customers are demanding extended terms from their vendors, in lieu of getting bank loans. If your vendor has thirty day terms, ask for sixty or ninety day terms. Do not ask the credit department. Go directly to your sales rep or the sales manager. Tell them you’d do more business with them if you had a little longer to pay. Let them fight it out with the credit manager. There’s a good chance they’ll accept your conditions because companies are lusting for sales.

And here’s a little secret that will help you extend those terms even longer. Many computer generated aged trial balances are set up to age receivables on the basis of due dates. Therefore, your September purchases, if you were granted sixty day terms, would sit in the current column in October and November. They would show up as only thirty days past due in December and sixty days past due in January of next year. Now, if your vendor’s collection department is typical of a lot of companies, no one is going to look at your balance until January. So, here’s another tip:

Do not pay until you are called. This is the “if they want it they’ll ask for it theory.” Regardless of the established terms of sale, some companies are perfectly content with waiting for their money. Or at least they seem to be content, because they’re not insisting you pay promptly. So, you wait and under the above described scenario, your sixty day terms have turned into one hundred day terms. Not bad.

Do not pay finance charges. So you are past due, technically. If no one is calling you, are you really past due? Finance charges, interest, late fees, whatever the term, are usually assessed automatically at the end of the month. Ignore them. Don’t call up the credit department or the sales department and make a fuss about them. Just ignore them. As long as you are paying everything else and you are continuing to buy, after awhile, they’ll go away. If they don’t and somebody squawks, tell the pest you don’t pay finance charges and see what they do. No one sues or puts customers on hold for non-payment of finance charges. Only banks to that.

Make arbitrary deductions. Do not take a percentage that will look like a discount. Someone can figure that out quickly enough and challenge you. But if you were to just subtract an amount, particularly an amount that does not match anything on the invoice, there’s a good chance someone will eventually write it off as an adjustment. You might get a call, but when you do, simply say you paid what you were told to and suggest they take it up with the sales rep. The partial amount may stay on the books for awhile and it may even accrue finance charges, but ignore both of them. Someone will probably write up a claim and send it to the sales rep, who will ignore it. The longer it stays on the books, the harder it is to reconcile and resolve and eventually they’ll write it off. Again, it helps if you are buying a lot and paying for most of it timely enough. In this way, you’ve gotten yourself a pretty good discount.

Pay Some of the Invoices, but not all. This is not the same as taking arbitrary deductions; you can still do that as well, but rather skip a couple of invoices. This will test the collection department. They may figure out which ones you’ve missed and send you copies. Right away. Or, if the bank applies the cash, or cash is applied on a balance forward basis, or collectors only call on total amounts and not the specifics, it could take a long time before it’s recognized to be a missed invoice or two, or three.

Lie. Leaving ethical debates aside for the moment, telling an inquisitive creditor that the check is in the mail when it is not, helps you buy time. How much depends on the frequency of the follow up by the collector. Another entire month could plausibly go by before someone calls you back to suggest the perhaps the check was not in fact in the mail. Possibly, you could gain another month by responding with another lie and replying that you will stop payment on the first check and re-issue. The only way to know is to try it once. It’s just a little white lie after all.

Deny the Balance. When someone finally gets around to calling you for money, your first response should be to simply say, “What bill?” Tell them you don’t have any invoices and you need copies and while they’re getting invoice copies, have them send you the proof of delivery as well. Or, ask for these after you’ve received the invoices and you’ll pick up another week or so. If your vendor has a modern system, you’ll have duplicates in short order, but if your vendor is not very sophisticated, if could take them several days to several weeks to put their hands on the documents.

By-Pass the Credit Department. Should you find yourself put on hold or C.O.D. by the credit department because of your supposed delinquent status, appeal to your sales rep, or the sales manager or better yet, the C.E.O. If it’s payment they want, commit to one. Don’t worry about how much of a payment or when you will actually send it. These people just want your business and they need something to tell the collectors when they also tell them to back off. This will buy you additional time, though it won’t make you any friends in the credit department.

FAX the Check but don’t actually mail one. This is meant to “prove” that you have either already mailed a check or that you intend to mail one that you have processes and signed. This works great if checks go to a separate location than where the collector is calling, say a lock box for example, or a corporate headquarters. Since the customer is always right, someone will have to search high and low to find the original check before getting back to you, asking for a replacement check, because they must have lost the first one.

These are only a few ways customers delay payment. Basically, they take advantage of the inefficiencies rampant in so many collection departments. A well run, well organized, well automated department responds to these issues quickly and makes it less likely for the customer to get away with these little tricks. Strategic Credit Management Solutions can help you build a well run collection department. We’ve been doing it for better than thirty years now. We’ve seen and heard all of the excuses and we know how to respond, proactively. See our website http://powerscredit.com/. You can e-mail us at patrickpowers@sbcglobal.net. Your comments are welcome.

An Ode To The Credit Manager

This past Labor Day recognized the American worker. Long over looked is the Credit Manager. So here is my tribute.

An Ode to the Credit Manager

Here’s to the lowly credit manager, a position that is rarely lauded
Though for all the work they do, they should be more often applauded.
It’s a job no one else wants to do
But they know how to do it better than you.
It’s not a job for the lazy
But after a while it’ll drive you crazy.

It’s a middle management position that carries a lot of responsibility
But when you come right down to it, success is an impossibility.
If you do collect all of the company’s money,
They wouldn’t need you any more, honey.
Instead they’ll drive you insane
Blaming you for all the balances that remain.

You are the Rodney Dangerfield of the management team
Getting no respect; to be heard you have to scream.
Senior management thinks you’re a clerk.
And the sales group thinks you’re a jerk.
While the customer is telling tall tales
That the check is really in the mail!

Still, you keep at it everyday, doing your best and making those calls
Listening to all of the complaints and breaking down all of the stalls
Because no matter what they say
The money you get goes into our pay.
You give the credit that’s due;
We’re depending on you!

Let Strategic Credit Management Solutions help you in finding the best ways to increase your cash flow, decrease your past due, lower your risk and increase your sales. See our website http://powerscredit.com/. You can e-mail us at patrickpowers@sbcglobal.net. Your comments are welcome.

Secure It Right, Totally!

To put it simply, extending credit to contractors is a major risk. They have no inventory to speak of. They have no money. All they have are the tools of their trade and the skills, arguably, to do their particular trade. In order to perform their trade they need building materials. A mason needs bricks and mortar. A carpenter needs lumber and nails. A glazier needs glass. Usually, the value of the materials far and away exceeds the contractor’s net worth. Therefore, in most states, the responsibility for paying for all these materials rests ultimately with the beneficiary of the materials; that is, the owner of the property in which the material is used.

In short, if you are building your dream house and you hire a contractor and pay him a lot of money to build it for you and somehow the lumber supplier does not get paid for the lumber, you, the home owner will have to pay for it…again. That is the essence of the Mechanics’ Lien Law. It enables building material suppliers to extend ridiculous amounts of credit to individuals who under normal circumstances would not qualify for the smallest loan.

In California, Nevada, Arizona and Washington, lien rights are the very foundation upon which credit extended to contractors are built. In addition to the normal credit functions of a credit department, processing credit applications, checking references, calling past due customers and posting the receipts, building material suppliers must also gather the particulars about the projects, send out preliminary notices, process waivers, apply the money to the specific projects, mail warnings of intent to lien and file the liens as well. Credit is based not so much on the credit worthiness of the customer, but rather the credit worthiness or the likelihood of repayment, of each and every single construction project. Invoicing must be job specific. A customer may have several job accounts simultaneously. It is quite the undertaking. Done right, a building material supplier can secure most of its account receivable. Done wrong, all the expense, manpower, trouble as well as the receivable can go down the drain.

If you are going to extend “job basis” credit, you might as well do it right. I have seen too many situations whereby a lot of money is spent processing and mailing preliminary notices, yet never a lien is filed. Sadly, this is not because all of the jobs are paying, but because somebody made the decision not to file the lien, or let the lien time pass and subsequently forfeited the money rightfully owed. I’ve seen suppliers sign away their rights by issuing the wrong waivers, signing off a joint check, filing liens in the wrong counties. There is any number of ways to sabotage what would otherwise be a safe and secure system.

This is where Strategic Credit Management Solutions can help. We’ve had over thirty years experience with building materials suppliers, general contractors and subcontractors. We are Lien Law experts. We can provide the systems, procedures and the training to establish and maintain proper lien rights. See our website, http://powerscredit.com/ or e-mail us at patrickpowers@sbcglobal.net. Your comments are welcome.