Credit guru Thea Dudley has spent more than 30 years in LBM credit management. Now she’s here to answer your credit and collection questions. Got a question for her mailbag? Contact Thea at theadudley@charter.net
Dear Thea,
We have been discussing the idea of “ranking” our customers to determine their terms and price ranges. Is this a common practice in this industry? Are there procedures or warnings you can suggest?
Signed, Rankled in Rhode Island
Dear Rankled:
Thanks for lobbing this hot potato at me! I am sure there is a sales organization in every company that spends hours upon hours sorting through spreadsheet hell to come up with the mental gymnastics it takes to produce that data.
I, however, am not one of people. Customers fall into five groupings for me:
1. Great
2. Okay
3. Not so great
4. What????
5. Oh hell no
I have seen organizations where sales tried to divide customers by type, margin, gross profit, sales–you name it. The data has been spliced, diced, carved, and served up in whatever the format of the day was.
What I have not seen in all my years in credit is a system that actually stuck. As a credit person, I know I can take someone’s financials and–depending on what I am trying to do for the customer–make those numbers say anything I want them to say. Analysts know that as well. The spin doctor is in!
I am in favor of good customers (whatever your definition of that is) getting more “honors and benefits” then the slow-paying, no-paying ones. Credit is a privilege, even if some think it is a right.
As for that pricing question: Not my circus, not my monkey. ANTITRUST SPOILER ALERT: WE ARE NOT DISCUSSING PRICING IN THIS COLUMN. For my little credit-manager-beating heart, the question begins and ends with: Can you pay for that? If you can, great, enjoy the purchase. If you can’t, put it down, step away from the product, and no one gets hurt.
I can’t tell you what is “common practice” on the questions you ask. What I have found over the years is there is very little that’s common in this industry. Except, perhaps, for how creative sales reps can get about credit-worthiness.
