When you're involved in granting credit there will be occasions (quite a few indeed) where setting a credit line based purely on reports and financial data or credit insurance availability is simply not enough. One has to move out of the office comfort zone and explore those often tougher opportunities that can so readily provide years of profitable trade.
In the mid-90s we traded with a reseller based in Leeds on a relatively low credit line of £10,000, but pressure in flow of orders and a desire to increase purchases via our company necessitated consideration of an increased £50,000 credit line. The company had only been established in 1993.
Payment was never an issue and while the required line fell below a non-qualifying insurance loss level we had to fall back on the quality of financial information and references from other known suppliers.
The company at the time traded from within the premises of a dairy company based in northern Leeds and chose to use the first three letters of the dairy company name. Absolutely nothing wrong with that but it led unfortunately to pressured credit support from other suppliers; one indeed somewhat fastidiously insisted they were a dairy company and refused to supply them.
Interim financial management data provided was a mess with bits missing and little balancing so no real credence could be placed upon these. There was really only one option: a long trip up the M1 to visit and get beneath the surface of the business, meeting the owners.
All phone conversations I had with two directors pushed me to make this journey and I'm grateful that I did.
With no navigation, it took a while to find the place but all I had to do was ask for the dairy. I parked outside and was met by one of the directors who calmly suggested I park the car inside the dairy itself if I wished to find all wheels intact on my departure. It looked a little rough in one direction so I ended up parking alongside a couple of milk-floats.
I'd interrupted coffee and donuts and was pleased to have them share these offerings.
They rented just two small rooms within the dairy company, a pretty useful arrangement given their early activities, and employed just a couple more people. It was really a case of getting to know them, their background, their decision to set up, their plans and intentions, their history, their current performance and management of the business.
I was once told by an old business colleague way back in the seventies that ‘Yorkshiremen' were ‘straight up' in terms of integrity and as conversation flowed, I certainly began to feel these were people I could trust implicitly. They showed me their internal operating system and accounting package, an early bespoke piece of software and not perhaps the best on offer. The system outlined and included everything at cut off and the trial balance figures were up to date and correct. The problem came when they hit the button to create the profit and loss and balance sheet for the period. The software simply refused to spit out the right figures or place them in the correct areas of either the P&L or balance sheet, hence the presence of gaps in interim management data and balance sheets that did not balance.
Some three and a half hours later, armed with their trial balance, suitably loaded with donuts and coffee and with a promise they'd refrain from sending me further management data with gaps until they had fixed the bug, I left them with the £50,000 credit line they wanted.
It took them almost a year to start supplying interim management data that was accurate and complete but the trial balance position was enough to convince me of their progress despite my having to manually create their profit and loss and balance sheet every month. Business boomed upward and I visited them at least three to four times after this over the years, increasing the credit line as required. Communication was regular as was provision of interim management data. We even found the time to discuss their company restructure and intended business sale/investment along the way. This outcome in trading relationships, one that creates an environment of trust which allows almost unrestricted topic discussion and sharing of future plans along with frank exchange of views, was especially rewarding; justification I felt, that my approach to meeting clients and staying in touch was the correct one.
The distributor that once refused them credit saying they were a dairy company relented. The business grew successfully over the years as fresh credit lines opened up. They are now into their 24th year although I see ownership has changed in the last couple of years. Sadly, as their credit lines opened up elsewhere and people moved on within our own organisation and their buying teams along with changes in their direction, business volumes tailed off a bit but the relationship with credit nonetheless still held strong.
Credit must be proactive in touching clients. The greater the number of touch points a supplier has with a client the stronger the relationship is. Sales people move on, as do those in marketing, and supplier directors may never get to meet reseller owners beyond occasional annual events. They rarely therefore get the opportunity to establish close links or have real empathy and knowledge of a client's pains or pleasures, hopes and aspirations, or moans about current trading. Credit is wonderfully placed to act as a conduit into ones organisation through which real tangible data can flow, enhancing growth and profitability for both client and supplier.
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