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How to Profitably Manage Receivables

From The Desk of Jerry Curtis

Dear Customer:

Without a good credit manager, most businesses are unaware of how to profitably manage receivables. Rather than work in a reactive mode, building a sound credit policy is the first step toward a proactive approach to credit management. A well-constructed policy lays the foundation for the credit manager to realize the benefits of sound portfolio management.

To realize all the benefits of a formalized credit policy, nine areas should be initially addressed. The primary sections to include in a sound credit policy should be:

1. Mission Statement
2. Goals
3. Define Credit Limit Authority
4. Credit Evaluation
5. Credit Limits
6. Terms
7. Account Monitoring
8. Credit Hold
9. Collections

Burt & Associates can help you establish a sound credit policy and be there to manage your collections process. The best collection process is one which is proactive and consistent.

Should you have any questions, comments or suggestions, please do not hesitate to contact your National Account Executive today.

With warmest regards,

Jerry Curtis
President & CEO

Educational Tidbits For Today’s Credit Executive
Failure to Reimburse Tax Payment May Constitute Unjust Enrichment

In the U.S. Wireless Corp. bankruptcy case, the liquidating trust asserted claims of unjust enrichment against an employee based on the failure to reimburse the debtor for payment of tax obligations arising from the exercise of stock options. The bankruptcy judge refused to dismiss the action, deciding that the complaint had set forth facts sufficient to support the claims and found it “worth noting that some of the disputed issues may arise from a misunderstanding as to when the taxable events occurred.Neither party addresses this tax issue. The complaint takes the position that the taxable event occurred…when [the employee] exercised the options.In contrast, [the employee] implicitly takes the position that the taxable events occurred only when he sold the stock, and not at the time he exercised the options. A yet-to-be presented analysis of the underlying tax laws may sharpen the issues.”

The Credit Manager’s Q&A Corner

QUESTION: Name the five C’s of credit when evaluating both new accounts and when reevaluating existing debtors, and which “c” is often considered most important.

ANSWER: Credit and finance executives rely on the five C’s of credit when evaluating both new accounts and when reevaluating existing debtors. But what do most credit and finance professionals consider the most important C?Character!Without the necessary character needed to honor a debt and make certain that the debt is paid in full, all the other four C’s, capacity, condition, collateral and capital, can become somewhat watered-down. Payment history is often one of the leading “tangible” variables when evaluating the character of your customers. Do they pay their bills in a timely manner? More importantly, when compared to industry days sales outstanding (DSO), do your customers measure up to industry standards? An important intangible to consider, however, is your own years of experience. What does your experience tell you about this customer?Howdoes all this information and your possible conversation with your customer make you feel?All too often we end up finding out, sometimes too late, that that “old feeling” we had about our customer was right on and that had we listened to it instead of “going by the numbers”, we may have avoided selling to a bankrupt account.