Working at a smaller company, there are the inherent benefits of being able to quickly adapt to changing market conditions, implement changes quicker, as well as having a more direct line of communication with your account base.  At the same time, however, there is the probable loss of information tools you may have had access to before. For our company, which is a footwear company based in the Action Sports industry, we are typically dealing with the “Mom & Pop” retailer who typically have only 1, or a few locations. Having the most current financial profile on these folks is typically unlikely, any reliance on D&B info is sketchy at best, and the possibility of credit insurance is unlikely considering the customer profile. So how do you handle the credit granting decisions with a hand like this dealt to you?

     At one of the previous companies I was at, we dealt with larger, capital-intensive projects with blue chip accounts where accurate financials were a google search away. These were also accounts that were seldom turned down by our credit insurance company Coface. Although at times I questioned the need to pay the high annual premiums to insure our credit portfolio, it would have only taken a single job to go sideways to make up for years of paid premiums. I would bet that in 18-months since I left that their credit insurance was tapped on a few occassions considering the primary customer profile was in the financial services sector. But then again, these guys were solid…right? But alas, my Coface coverage was a tool that can’t be applied to the customer profile that I am dealing with now.  On to the next move….

     In consideration to all the D&B reports that I have pulled, I have found, in general, that this information is not typically reliable at the corporate level and often lags in getting the information updated. Sometimes over significant periods of time. I would NEVER make credit decisions based on Dun & Bradstreet information alone. It’s merely a single factor in the consideration of approving a new account or keeping tabs on a existing account. Ok, what next….

     I am a huge advocate of trade groups and their ability to gather and share information at more of a “street-level” application.  But from a financial perspective, I have found that trade groups within the Action Sports industry are somewhat non-existent. There’s fantastic trade groups at the Retail level, Environmental level, Manufacturer level, but I have not found one that focuses on the financial side.  Maybe an opportunity here?  I was recently contacted to become part of Footwear Industry Trade Group. The concept is in its infancy, but we went through a demo and reviewed the available tools. Really a solid approach and has great promise. However, in reviewing some of the companies they have participating, they are not in our peer group. Any sharing of information would be of no benefit to us. The companies that are currently signed up are not sold through our typical account profile. I tentatively committed to our participation in the group, but only if they successfully signed more of our peers. So what am I left with…?

      I’m left with the key element that is driving the current growth in our business and allowing us to post numbers higher than last year….the relationships that we have with our accounts and the collaborative approach we take with them.  We take a sincere approach to developing partnerships with our account base and supporting them in whatever way we need to, so long as it also makes sense for us as a business. Whether that’s international or domestic. Whether that means sending out an email myself on a past due invoice, calling them directly to discuss a paymet plan, or to just discuss their general outlook. I believe it’s that approach that has allowed us to mitigate our credit risk and realize a bad debt expense percentage that is far below industry standards.  While there’s always the unforeseen risk that might always catch us by surprise, I do everything I can to minimize that risk and maintain a keen focus on our collections activity in this environment. Do you know what your current risk levels are?

Thanks for reading. . . .

Jeffrey Ishmael