AKRON-Overdue accounts. Often so tough to collect, they not only provide cause for great aggravation, they can also impact a company's bottom line.
A new Akron company has begun offering a ``rent a credit department'' service that its owner believes can help tire dealerships reduce past-due account numbers, bad debts and interest expense and help increase cash flow.
Before he left Michelin Tire Corp. as its U.S. director of credit administration, Alan S. Fox spent 10 years in the tire manufacturer's credit department and was responsible for merging Michelin's and its Uniroyal Goodrich subsidiary's credit organizations.
This past April he formed Credit & Financial Outsource Services Inc. (CFOS) to assist tire dealers and retreaders with their credit, collections and overall operations.
Mr. Fox, 35, the firm's president, hopes to take the same tack as when he was with Michelin, traveling the country analyzing dealers' financial statements, business environment, cost-sales ratios and gross and net profits.
He's confident he can advise dealers on how to cut back in certain areas, if necessary, while also avoiding the pitfalls of excessive liabilities and borrowing long term to pay short-term debt.
So far, CFOS has one full-time client, a large southeastern U.S. tire dealership for which Mr. Fox said ``we reduced past-dues by more than $400,000 in August.
``We try to get customers to leave all their credit work to us, in order to let them concentrate on the sales, marketing and service part of operating their business,'' he explained. ``That's what most tire dealers are concerned about.''
Credit and collection are constant headaches in the tire business, but Mr. Fox said one aim of CFOS is to ``get the emotion'' out of a dealer's money.
``...We make sure we contact the (dealer's) customers amiably and try to work with them. We use our company name when it's a hard collection where the customer is having a hard time paying.''
CFOS, Mr. Fox contends, can help dealerships improve operating procedures.
``Many tire dealers do not put enough emphasis on the credit function,'' choosing to leave it in the hands of their sales departments, he said.
If sales personnel are responsible for credit and collections, a company will have above-average past due and bad debt write-offs, he pointed out, because sales personnel ``do not like to do anything to antagonize the customer.
``It is more difficult for them to ask for money, references etc. than it is for a credit professional,'' he continued. ``A good credit manager can accomplish these tasks in a way to continue providing exceptional customer service.''
To obtain CFOS' services, a dealership signs a 12-month contract and pays a monthly service fee based on its size and number of customers and transactions.
``We try to charge less than if a tire dealer had to hire a credit manager or employees,'' Mr. Fox said, and with CFOS, the dealer avoids having to pay benefits.
CFOS provides clients with monthly status reports, including what Mr. Fox called a ``critical issue report'' outlining a dealership's past-due accounts over $5,000, an update on those accounts and balances and who the ``problem'' customers are.
``We're constantly auditing ourselves,'' he noted, ``so that over a six-month period, a dealer can see how his money is coming in and if we're doing our job properly.''
Before arriving at a price for CFOS' services, Mr. Fox said he does an on-site dealership evaluation that includes a look at its ``age-trial balance,'' showing the company's customers and how long accounts have been carried.
``We see what shape their receivables are in,'' he said. ``...If they're excessive, we believe we can help them, to a certain extent, reduce those numbers.''
The CFOS staff also includes the firm's vice president, Tina Patterson, a former Michelin national accounts credit manager who worked for 15 years with Uniroyal Goodrich Tire Co.