I’ve been reading your column for a long time and I can’t believe I’m actually writing to you. But here I am and I’ve got a big problem. As the credit and collection manager for a small wholesale distributor (there are only six of us at the company), it seems like we’ve been losing one customer a day. What’s been happening is that the salesman has been sending me an email inquiring as to how much this or that customer owes us, while letting me know they will not be purchasing from us going forward. The reason is that the customer is making a change to purchase from one of our competitors in the area due to a cheaper price.
It really makes me feel very sad when I see these customers go, and especially in this environment, we need every single sale and collection. As the credit professional in our company, what should I do to help?
I’m glad you reached out to me since we all need help from time to time. The fact that you’re worried about your customers dropping off so dramatically speaks volumes for your level of conscientiousness and care for your company. Although this problem is one for all in the company to be involved in, from a credit perspective, here’s my short list of what you might be able to offer your customers in order to preempt their desire to purchase the product elsewhere.
1) Go through every credit file and evaluate which customers you could begin to offer higher credit limits and/or extended credit terms. Letting certain customers know that they are free to order more with terms that are little longer may just be the kind of proactive move which could begin to stem the tide.
2) For certain customers, especially those that make up the 80% portion of your sales, call them all and see how they’re doing. If they indicate that they’re having temporary cash flow issues, you may want to consider offering a one or two time discount, or a two to three time installment on the current balance. Giving an unexpected “gift” in trying to help them without being asked will hopefully endear them to you.
3) Offer any payment method that could save them money and time. You might be surprised that some customers might want to pay by credit card instead of making out a check each month and mailing it to you. Or, if you have enough profit built in to your product, on a case by case basis try offering terms of “1% discount on Net 10 days.” Some customers who have been paying you on the early side, may jump at this additional incentive.
4) When any of your accounts become past due, continue to speak to them very nicely and empathetically. Many companies are facing difficult times and when they feel you understand “their pain,” no doubt they’ll appreciate your approach and may feel more loyalty to continue purchasing from you when they recover.
5) Although this may be outside of your parameters of responsibility, what direct, indirect, variable, or fixed costs can be reduced to the extent that the cost savings can be passed on to your customers in reduced prices? This will take some time to analyze but the faster you can start to save money for your customers, the quicker you’re going to thwart the lower price advantage that is being offered by your competitor.
Hope the above helps. Please let me know what happens.
Dear Crabby is a credit and collection advice column by Nancy Seiverd President CMI Credit Mediators Inc. Your thoughts and comments (firstname.lastname@example.org) are most welcome!
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