Who’d be a credit manager? I say that because the loss of Tie Rack from the high street is yet another sign of the changes being wrought by the shift to online shopping – which is where the tie sales are heading – and the squeeze on business finance.
Tie Rack, which was once a byword for the entrepreneurial style of its founders, had been making losses for years. In part, men’s fashion had moved on and the tie was no longer obligatory for the office.
Yet the ‘To Let’ signs are not just going up outside the former branches of troubled retail chains. Plenty of small shopkeepers have ceased trading without making headlines, as Angel Harjani, group credit manager of French Connection, pointed out in CCR Magazine last month.
And it’s also the SMEs in the supply chain that have been taking blows during the downturn, often left with bad debt when stores close. They’re not glamorous businesses, but they do provide an awful lot of jobs.
The key question is: how do you judge whether to extend credit to a customer? The limited company credit report is, Harjani says, no longer the mainstay of a credit assessment. ‘Companies classed as small – this with no profit and loss account available – muck about with their stock valuations and all sort to reduce the profit to reduce the tax on that profit.
Networking is one way to improve your knowledge of businesses in your industry or local area. Harjani suggests joining a credit circle or society within your industry and ‘sharing information on prospective and existing customers.’
Trade references, he reckons, are invaluable but warns that you must read between the lines.
Most important, though, is to meet the customer and gain insight from the personal touch. I’ve emphasised before the importance of meeting people. Relying on the phone or email is no substitute for getting out and about.
The gut instinct that tells you something is wrong is more likely to kick in when you meet face-to-face.
And when you do have to stop credit, or limit its availability, a clear explanation of how and when it can be restored carries more weight when you know the customer personally.
SJ Collections has unrivalled expertise in debt collection and credit management, especially for companies where that’s not a separate management role.