The Twelve Steps To An Effective Credit Policy
By Robbie Burch and Andrea Schlack
Granting credit is like opening a Christmas present, you never know what you’ll get till it’s unwrapped!
So, in the spirit of the holiday season, we here at PICB would like to share with all our clients and Members of The Printing Industry of America our 12 top tips to help make sure the gift you open is something of value and not a lump of coal
- Partridge in a Pear Tree: You’d be surprised by how many companies don’t even utilize a credit application, and instead rely on handshakes and a verbal promise. The 1st step is to have a credit application, to begin with. Here are some basic questions that should be at the root of every good application.
- Turtle Doves: Who are all of the responsible parties involved in the company’s management? Not just the president, secretary, or vice-president, but shareholders and investors as well.
- French Hens: Ask for all of the locations that the business operates from, not just the primary address for the company.
- Calling Birds: What phone number is the company using? The phone number for the company is a good indicator as to whether or not the business is ‘fly by night.’ Landlines registered to the physical location for the business are a better indicator of a solid company than mobile numbers as the only contact for the customer.
- Gold Rings: How many secured lenders have your potential customer already promised to pay? Trade references are important, but knowing the secured lenders for the company you plan to do business with is equally important. If you’re not the first in line to be paid, how many companies are already in front of you?
- Geese-a-Laying: The type of business the company operates helps to determine what type of income flow may be available in the future. There are certain businesses, due to the technological advancements of the last 15 years, that is simply obsolete. Do you really want to invest in a company specializing in pagers or car phones?
- Swans-a-Swimming: How much is the company requesting? Lines of credit are important to any company looking to succeed, but the amount that is being requested must be in line with how much the company can be expected to make.
- Maids-a-Milking: How exactly does the company create revenue? Are they a broker? Does the company rely on government contracts? Where is the stream of revenue coming from? Are there several customers, or is the company reliant on a single buyer?
- Ladies Dancing: What profit do you stand to gain? Is the line of credit, and the profit potential worth the initial investment?
- Lords-a-Leaping: Does the company have any tax liens or court records? Have they been sued for non-payment or owed the State/Federal government for unpaid taxes (remember to ask for the Federal Tax ID # on every application)?
- Pipers Piping: Do the trade references for the company indicate a long-term commitment where the customer has paid on a timely basis?
- Drummers Drumming: If your credit application is solid (asking all of the right questions), and the answers that are returned are satisfactory, then it’s time to make an investment and drum all the way to the bank!
As an attorney that prosecutes cases to collect overdue monies due to printers, I can not thank you enough for publishing this article.
It makes the debt collection process so much easier to have copious amounts of information on the customer. Write on Andrea and Robbie!