Credit Management Profile: Collections—The Power of a New Set of Eyes

By Wayne Mueller

Sweet, as the Poet said, are the uses of adversity. This veteran credit executive went through the Covid pandemic with booming sales and a drastically reduced collection staff. Recently the staff has been built back up. But he managed his way through the crisis just fine, and he’s made major improvements to credit and collection operations along the way.

Preparing for the uncertainties of the impending Covid pandemic back in March of 2020, Kravet, Inc. slashed its collection staff by half, from 16 down to 8. In retrospect, this was probably not the best move.

“We got slammed,” recalls Credit Manager Carlos Anderson. “We were really busy. As millions of office workers were shifted from company premises to their homes, demand for Kravet’s high-end fabrics and furnishings exploded.

“Everybody was home and they all wanted everything,” he explains. “On top of that, people weren’t traveling. Instead of spending money on vacations, they were redesigning their homes. They needed new sofas and drapes, things like that which they’d had in offices and showrooms before they switched their businesses to their homes.”

Now business has slowed down, but during Covid customers bit off more than they could chew, or they didn’t have their normal customers because they couldn’t visit them or maintain storefronts. “We were seeing the little guys drop by the wayside,” he says. “It’s sad. A lot are just closed their doors without even filing for bankruptcy.”

Fortunately, many of those smaller customers prepay since they may not qualify for credit or even want it, so the impact was been minimal. But, there have been some large bankruptcies with losses of over $100,000.

More than small accounts, his biggest concerns are now retailers because so much business has shifted to the Internet. “They scare me the most now,” he says. “You try to keep them on a short lease. You try to gather as much information as possible to track trends and find out how they’re paying other people.”  

He sets up all types of alerts for any news about larger accounts, including Google alerts and some of the credit services like CreditSafe and Credit Risk Monitor. And he is constantly surveying his sales force. “Are you hearing anything? Let me know if there’s anything out of the norm when you visit them.”       

He instructs the credit staff to be alert to changes in customer payment patterns, such as when someone who normally pays by check switches to credit cards. “I know they may be looking for perks from the card company, but it can be a red flag—particularly if they’re using different cards,” he notes.    

One customer they’d had for over 20 years had always paid by check. “The checks would come in within seven to 10 days of the due date, which to me is just processing time,” he said. “Then suddenly, they began using credit cards. This obviously was not for perks because he was juggling cards. That raised a red flag that we might be having cash-flow issues. He called the sales rep who tried to visit the account and discovered that the storefront was closed. The customer was now operating his business out of his home and soon began having the end users pay the bills directly.

Since this was totally out of the norm, Anderson called and told him that if payments would be by credit card, Kravet would be absorbing fees and could not extend him terms, so he would have to go on prepayment.  

“I didn’t want to tell him that we thought he would be going out of business,” he says. “He wound out placing another $15,000 in prepaid orders before shutting the business down.

“It's hard to stay on top of everything,” he continues. “We have a lot of customers and I try to have my staff be alert for these changes in payment patterns or in how customers are ordering or in order sizes.

“When a customer who normally buys $1,000 a month sends in an order for $10,000, you’re happy to get the order, but you don’t want to just release it. You need to have a discussion first: ‘Thanks for the order. It’s wonderful. What are you working on?’  Just keep the lines of communication open and get more information.”  

Recently the pandemic prompted staff reduction has been reversed, and he’s been able to hire four new collectors. “It’s like having a fresh set of eyes,” he enthuses. “They’re moldable. I can teach them new tips and tricks, whereas someone who’s been doing it for years may tend to get in a rut.   

“A collector who has been dealing with an account for a long time may have developed a relationship. While that’s often good, there can be a downside. It can lead to leniency. You might release an order that you wouldn’t release for someone else, thinking, ‘I’ll be able to collect it. It’s not a problem.’”   

“Even though it was very rough during Covid trying to get everything done with half the staff, it gave us an opportunity to become more efficient,” he continues. “We’ve been able to streamline processes and build on that so that we could get by with less staff but actually perform at a better rate.”   

Working with the IT Department, they converted the majority of customers from paper to electronic billing and payments. They also added payment portals, allowing customers to enter the Kravet website and process card payments, rather than calling in the details. Paper invoices and check payments are now down to a few stragglers.   

“We’d been trying to do these things for years,” he says. “With Covid, because people were working from home, we needed to get more information. I told collectors to make sure they got customers’ cell phone numbers because that’s their office now. We can now text them if they’re not responding to phone calls or emails.

They have also tried to come up with different ways to contact customers to make it easier to do business with them. “We’ve enhanced our website and seen increased usage. Orders placed online have risen from 25 to 40 percent.” That’s sweet.

Contact Information for Carlos Anderson:

• Phone: 516-293-2000 x2370
• Email:anderson@kravet.com