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Q. What’s the best way to handle skips?
A. The best way to handle skips is to avoid them in the first place.
It’s much harder to get your money back from someone who’s skipped town than it is to do your homework upfront. But you can’t weed out everyone. One dealer told me he expects to lose about 3 percent of sales this year to skips. How much will you lose this year?
Obviously every dime you can reduce in bad debt is a dime in your pocket. So, here are some tips to help.
Remember: it’s your money
The first step to protecting yourself is to gather all the details you can during your customer’s first credit purchase. It may seem overkill to go through all that for a $100 truck account, but it’s easier to ask a new customer for all his information during his first purchase than to ask him after he’s been buying from you for a year or two and his credit limit has crept up to hundreds -- or even thousands of dollars. Get his information upfront. Check it often and keep it up-to-date, especially when you’re increasing his credit limit.
“We’ve got one skip in our database that owes $12,000 to one truck,” says Tim Anderson of SkipCheck.com, a national skip database service dedicated to the tool and equipment industry. “Distributors ask me how someone can get to that point. It happens a little bit at a time. It just creeps up ... I’ve talked to some distributors who have extended credit to a guy without even knowing his last name or phone number.”
It seems some dealers ask more questions of the guy taking their teenage daughter on a date than they do of the guy walking away with a couple hundred dollars worth of his tools. (Although in both cases, the more you hold the guy accountable, the more likely he’ll behave honorably.)
“When you want to close a big sale really badly, it’s easy to forget to get all the information,” says Anderson. “I suggest asking for a driver’s license. It’s harder to fake a license than something like a social security card that’s just paper. There’s a lot of security measures built into a driver’s license, like how you can check it with a UV light.”
Your new customer credit checklist should include: a copy of the customer’s driver’s license, Social Security number and a home or cell phone number. Some dealers even ask for a credit card number so they can charge it with the balance in full if a customer skips. (Ask your district manager or legal advisor about your state laws on this.) If you can do it, go for it.
Check the database
“I first run his Social Security number through the Matco system,” says Tom Perrin, a 16-year Matco distributor serving Chicago’s West side and suburbs. “That helps me see if he’s skipped on another Matco dealer.”
“About 90 percent of a flag’s system include only skips from that flag,” says Anderson. “If a guy’s skipping on one flag, chances are they aren’t going to buy from that same flag at their next job.” Anderson designed the SkipCheck.com online database so dealers can check nationwide across all flags and independents for dealer-reported skips before deciding to extend credit.
“It’s still your choice,” says Anderson. “But it gives you the power.”
Obviously knowledge is power. But you can’t predict if someone not in a skip database will end up there, soon. So, it’s best to extend credit slowly and let the customer prove himself.
“You’ve got to keep it down,” says Perrin referring to how much leash he gives a new customer. He starts by giving customers $100 to $200 in credit and watches how they pay before extending more credit. He also keeps a good relationship with shop owners who will often help him however they can with skips.
A distributor shares his collection techniques.