While many companies are facing a recessionary shortage of demand for their products and services, their employees are simultaneously weathering higher demands for better performance from their superiors.
Customers may be absent and payment may be harder to collect than it ever has been before, but companies still continue to ask much of their salespeople and credit professionals. And more than just trying to maintain, many employees are working to improve their company and their department's performance, even as they face one of history's toughest business environments. "What we're saying is ‘how can we in the credit department improve the quality of the accounts receivable (A/R)?'" asked Scott Blakeley, Esq. of Blakeley & Blakeley LLP. "Their responsibility in this recession is to find a way to improve the quality or collectability of their A/R on the one hand, yet on the other hand they have customers pushing invoices past what the credit professional originally evaluated."
"We find then that the role of the credit professional instead is a relationship builder at the highest level," he added.
As customer payment has become ever more elusive and infrequent due to tightened credit nationwide, delinquencies have kept pace and creditors have been forced to grasp to keep the customers they have, let alone find new ones. "We don't have the customer base that we did two years ago where we could hold the order and call on other companies," said Blakeley. Maintaining a relationship with customers who have failed to live up to their expectations can be a difficult process however, and Blakeley, in a recent NACM-sponsored teleconference entitled "Getting Paid on Your Delinquent Account," illuminated the many in-court and out-of-court options available to creditors and debtors looking to work out payment and keep their trade relationship intact.
The first step for creditors is to determine whether or not their account is actually delinquent. The simplest way to do this is to look at the original invoice. "The easiest measure is the terms that we established at the evaluation stage," said Blakeley. However, a less quantitative measure can often more firmly establish a customer as delinquent or not. "Where the rub can be is the customers' efforts to extend out those terms through excuses," he added.
Once an account is considered delinquent, many creditors can wind up with legal exposure if they become too accommodating of the customer's new, later payment schedule. "We need to be mindful that accommodating that customer's cash flow may result in a dispute with the customer of course of dealings," said Blakeley. "If we're committed 45 day terms but routinely accept payment outside of those, the customer may say that course of dealings controls the sale." Under the Uniform Commercial Code (UCC), a debtor can cite the course of dealings defense to keep from paying a creditor what's owed.
Blakeley also discussed a number of other pitfalls for creditors to avoid, as well as different ways to ensure a customer's payment before things wind up heading south.
Jacob Barron, NACM staff writer. Follow us on Twitter at http://twitter.com/NACM_National