|
Credit Service Draws Raves From Clients
Credit and Collections Letter - November 2002 |
When credit service providers approach us to consider publishing articles about them, we’re cautious. We tell them we’ll do nothing until we’ve talked with several of their clients. Last month, when we went through this vetting process, we got the most enthusiastic endorsements that we’ve heard in the 36 years since we started this Letter.
“This may be the biggest bargain in the financial services industry,” MaryAnne Lucier, vice president for Deer Creek Fabrics (Stamford, Conn.) told us. “For $30,000 a year we get all of our receivables management, a line of credit, and credit insurance. It would cost us twice that much just to hire somebody to handle our receivables.”
“It’s not just a job to them,” says Michael Begleiter, CEO of Crystal Kobe, Ltd. (New York, N.Y.). “They’re extremely knowledgeable and extremely supportive. The executive assigned to your account takes a personal interest in your success.”
“We’re unusual in our industry in that we’re able to operate entirely on collected funds,” says Benedict Esquerra, controller for R & S Sportswear, Inc. (Vernon, Calif.). “Without their service, we probably couldn’t do that.”
What all three are talking about is CIT Commercial Services’ factoring program. Succinctly put, the program is an agreement under which CIT purchases its clients’ accounts receivable and assumes responsibility for their customers’ ability to pay.
The process of carrying out this agreement involves CIT customizing a procedure for approval of all orders, performing credit investigations, establishing credit lines, and maintaining credit files. Once the client company ships approved orders and invoices its customers, CIT takes over from there. CIT collects the accounts receivable from the customers and performs the related bookkeeping function. As needed, CIT can also provide cash advances against open receivables prior to collection.
Another service, called Credit Protection, is used by those who only want credit protection and prefer to handle their own billing and initial collection efforts. There’s confidentiality in this process that many appreciate. “Our clients can protect themselves against bad-debt losses without letting their customers know they’re concerned about their creditworthiness,” notes CIT Senior Vice President and Regional Manager Jon Lucas.
A variant of the program is Select Customer Credit Protection, under which CIT guarantees payment for customers that are either in some kind of financial difficulty or that involve credit exposure beyond the client company’s comfort level.
CIT will also take over segments of the receivables process if the client so chooses. Deer Creek Fabrics sends invoices (assignments) to CIT at the end of each week. “We can then draw down cash against these invoices before they mature,” says Lucier. “That’s our credit line.”
What about disagreements over the credit lines CIT establishes for customers? “That occasionally happens,” she says. “and usually CIT is right. However, if there’s something I really don’t agree with, I know they’ll be open-minded and I can appeal right up the line. And often they’ll change their mind.”
The contrast with other factoring firms she’s dealt with, she says, couldn’t be more stark. “CIT is really professional. Our account executive is the smartest person I’ve ever worked with. We’re a team.”
Mattel Carpet, Inc. (Dalton, Ga.) has had the same CIT account executive since 1989, when they signed on as a client, and CFO Perry Thomas couldn’t be happier with her. “CIT is an excellent organization,” he says. “They really know the industry, and they have access to far better information than we do. So I don’t question their judgment.”
Mattel’s assignments to CIT average $250,000 a day, with 90 percent of that becoming available immediately as a credit line. Thomas says that since Mattel has not needed much of this money lately, they have allowed $3.5 million to accumulate in an interest-bearing account.
“That shows how much we trust them,” he says. “The rate CIT pays is competitive with the banks.”
Lower Fees, Better Service
Thomas says CIT fees are lower than those of other factoring organizations, while the service is better. “We’ve used other factors,” he says, “and I’d never go back. CIT really offer a superior collection service. And what we pay them is far less than what one bad credit decision could cost us.”
Indeed, all of the clients we spoke with were anxious to make the distinction between the CIT program and other factoring arrangement they had either explored or had actual experience with. “I won’t name names,” said Anne Marie Lucier. “but we’ve had experience with three, and they were more expensive, unreliable, and the people handling the accounts tended to be unprofessional.”
CIT’s wealth of credit information and keen understanding of their industries were also cited as crucial advantages over competing factoring firms. “We’re in the garment industry,” noted Crystal Kobe’s Michael Begleiter. “That means we’re seasonal and we have all kinds of special issues. CIT understands that, and it means they can give us the kind of help we need.”
