September 30th, 2010 by Alex Coté
“Much of our business is in residential home construction which was obviously hit hard. 2008 was a rough year – it was for everyone. But in some ways that was a good thing. We sat down with senior management and got a significant amount of support to make changes and refine our processes to better protect the business. We built a system that makes credit management part of our regular processes not an afterthought. We were able to get involved with customers earlier and even upfront to protect a job before you even ship the first material which has contributed to the bottom line. Even though it was tough climate we were able to keep bad debt down to almost pre-recession levels.”
“Yes – we have always been a bank for our customers, but that’s the nature of our customer base and the industry overall. Most business is on credit sales, especially for smaller customers that have never had a bank line and won’t get one in this credit environment. They rely on supplier credit and the deposit from their next job to keep cash flow going. We know our smaller customers can be higher risk, so we try to find the best security on each job and have tightened up our collections strategies as necessary. We try to make the credit work. Our industry is very fragmented. Even though sales are down for everyone, the company that is still able to aggressively work with customers actually has an opportunity to increase their sales as competitors weaken. We are well capitalized, so for us it’s an opportunity for us to take market share.”
“Wholesale distribution is all about customer relationships. It’s not like you are working in a call center. My people work the same customers year in and year out, they develop relationships with them, they communicate well with them. Working credit for this industry is about establishing and creating those relationships and using that information to guide you. I’m a big believer in the cradle to grave approach to credit management – credit managers making their own decisions all the way through collections. That said we do have scorecards and credit polices built into Cortera’s eCredit software along with credit limit authorities – exceptions to the policies have to be documented and approved. In our business we deal with so many small customers it can be difficult to get good credit information. In reality most of our customers are a higher credit risk than the general business community at large –we just need to know how much risk and how to follow-up after the deal is done. We use multiple sources of information. Our job is not to be the sales prevention department. We try to figure out a way to make the sale make sense even if a customer appears to be pretty risky. We do try to make it work.”
(1 votes, average: 5.00 out of 5)
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Fascinating interview!
Judy Waters’ comments verify what I’ve been observing for a long while— in bad economic times (such as the current recession), distributors like Waters’ WinWholesale are the real bankers for millions of small-to-medium businesses— not banks or gov’t agencies! Fortunately (for Judy and WinWholesale), Cortera is a wonderful resource to give credit managers the intel they need to be able to make smart decisions on prospective and current customers.