Consider this: You're at your CES booth, handing out free pens, bags, or brochures, when an attendee representing a retailer of whom you've never heard approaches you. After you introduce your product line, he decides he'd like to make a surprisingly large order.
Or you're in your office and a retailer you do know rings you up or sends you an email to place an order far larger than they've ever placed previously.
Or a large, well-established national chain with well-publicized financial problems contacts you to place a substantial order.
These are all tempting offers ― but are they risks worth taking?
According to a recent TWICE survey, many vendors rely on less than perfect methods to check the credit viability of a prospective retailer: more than half of the respondents said they rely on references or other human intelligence; another 27 percent rely on credit manager knowledge or experience; and 22 percent of vendors conduct a simple Internet search.
These methods will yield a variety of results without giving you an accurate picture of a retailer's ability to pay for the order. The only way to be sure that you're not shipping products into a black hole is to know the payment and credit history of the retailer. And it's difficult to check the credibility of any retailer who visits your CES booth or calls you.
Yet, shockingly, less than a quarter of respondents avail themselves of the services of an outside credit checking company.
A financial services company that offers accounts receivable (AR) management services maintains a large database of retailers and wholesalers to determine their creditworthiness based on their payment histories, among other things. We're talking about a running payment record tally showing the transactions of thousands of retailers compiled over several decades.
An AR management company is likely to have a longer and more accurate credit history for an unknown retailer than your credit manager, other vendor executives, the Internet, or a crystal ball. You'll get an up-to-the-minute and accurate assessment of a retailer's ability to pay.
Best of all, clients can readily access some of an AR management company's retailer credit data online or via a smartphone app. So the information is always available to your sales staff, whether they're engaging with a potential retail customer at your CES booth, on a sales visit, or on the phone with an existing customer.
Of course, the picture that this sales data paints isn't always complete and may not be cut-and-dry. We know there are times when your heart is tempted to overrule your head. You really want to ship those goods, despite what the data says.
In these cases when you feel as though you want to follow a hunch or make an exception, or when the data is borderline, if you're a client of an AR management company, such as CIT, you can speak with your dedicated client service officer to better understand the creditworthiness of a specific retailer and their ability to pay. The client service officer often has access to information that allows him or her to take deeper data dives and provide more detailed analysis of a retailer's record, which can assist you in making your decision whether or not to sell to the retailer.
Having access to accurate and up-to-date credit checks means you may be able to sell to retailers you might not have been able to otherwise, allowing you to expand your reach and your revenues. With accurate credit checks made by an AR management company, knowledge isn't just power ― it's profit, too.
Middle market companies are an interesting breed. While less talked about than small and large cap businesses, they are the market that moves America.
Has one of your retailer buyers gone bankrupt? Credit insurance can help salvage some of your loss, but there's a better option.