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Selling To Risky Customers All Industries


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WRCC - Saying Yes to Accounts with limited info

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Selling To Risky Customers All Industries

  1. 1. How I Can Say “Yes” When Everyone Else Says “No” Selling to Risky Customers in the Construction Industry CMA Business Credit Services Western Region Credit Conference October 19, 2007 Presented by Kathleen Tomlin, CCE Central Concrete Supply Co., Inc . Central Precast Concrete
  2. 2. Credit Applications <ul><li>Create “hooks that give you power if things go sour. </li></ul><ul><ul><li>Power of attorney to sign off on joint checks </li></ul></ul><ul><ul><li>Power to apply funds at your discretion vs. customer’s </li></ul></ul><ul><ul><li>Power to offset amounts owed against commonly owned affiliates </li></ul></ul>
  3. 3. Do Your Research <ul><li>Who’s got the money? </li></ul><ul><li>Who’s your customer? </li></ul><ul><li>Who are you? </li></ul><ul><ul><li>Subcontractor/Distributor </li></ul></ul><ul><ul><li>Manufacturer </li></ul></ul><ul><ul><li>Sole Source Provider </li></ul></ul>
  4. 4. Doing Your Research <ul><li>Use the Internet </li></ul><ul><ul><ul><li>CLSB – check out all licenses </li></ul></ul></ul><ul><ul><ul><li>Recent articles – complaints, permits, liens or stop notices (Google, Yahoo search, CalTrans-type sites) </li></ul></ul></ul><ul><ul><ul><li>Parent, affiliate relationship </li></ul></ul></ul><ul><ul><ul><li>Who’s the owner of the project </li></ul></ul></ul>
  5. 5. Create a Guarantor <ul><li>What if your customer is no good? </li></ul><ul><ul><li>Do they have a parent company? </li></ul></ul><ul><li>What if the owner/parent company is no good? </li></ul><ul><ul><li>Is there property with real value? </li></ul></ul><ul><ul><li>Can you attach other assets? </li></ul></ul><ul><li>Is there a surety to cover you? </li></ul><ul><ul><li>Letters of credit, payment bonds </li></ul></ul><ul><ul><li>Is the surety solvent? </li></ul></ul>
  6. 6. Contract Documents <ul><li>Read EVERYTHING!!! </li></ul><ul><li>Agree only to what you can live with </li></ul><ul><li>A contract is only an offer—negotiate </li></ul><ul><li>Do NOT let sales sign everything </li></ul><ul><li>Do NOT let sales NOT sign everything </li></ul><ul><li>What you DON’T do can hurt as much as what you DO do! </li></ul>
  7. 7. Contract Cautions <ul><li>Plans & specifications of Prime Contract </li></ul><ul><li>If you begin to ship you have agreed to terms </li></ul><ul><li>If you fail to deliver, you pay for their increased costs from a competitor </li></ul><ul><li>Prices have no escalator or time frame </li></ul><ul><li>Deliveries are per buyer’s/contractor’s schedule </li></ul>
  8. 8. More Contract Language <ul><li>When/if they get paid you get paid payment terms </li></ul><ul><li>Warranties </li></ul><ul><li>Other terms or documents incorporated by reference </li></ul><ul><li>Delivery terms </li></ul><ul><li>Dispute resolution venue </li></ul>
  9. 9. <ul><li>CONTINUING GUARANTY </li></ul><ul><li>In consideration of the extension of credit by Central Concrete Supply Co., Inc. dba Westside Concrete Materials (hereinafter called &quot;Central&quot;) as it may see fit ___________________ (customer) which we hereby request and in which company we are financially interested, for value received, the undersigned (hereinafter called &quot;Guarantors&quot;) unconditionally guarantee the punctual payment of any and all indebtedness, whether such indebtedness now exists or is incurred hereafter of _____________________(customer) to Central Concrete for ready mix and all other products sold and delivered by Central Concrete to _____________________(customer) or its designee. </li></ul><ul><li>This is a continuing guaranty to Central Concrete relating to any indebtedness including that arising from the project _________________________________ (project) including that arising under successive transactions, up to a maximum of $_____________, which shall either continue the indebtedness or from time to time renew it after it has been satisfied. However, this guaranty shall not apply to any indebtedness created after actual receipt by Central Concrete of written notice of its revocation as to future transactions. </li></ul><ul><li>No extension in the time of payment or other indulgence or change in the terms or amount of payment granted by Central Concrete to_________________ (customer) shall release the Guarantors from the obligations contained in this guaranty. The Guarantors waive notice of acceptance, notice of protest, notice of dishonor, and of non-performance and notice of the amount of indebtedness outstanding at any time. </li></ul><ul><li>The obligations of the Guarantors under this guaranty are independent of the obligations of _______________(customer) and a separate action or actions may be brought and prosecuted against the Guarantors whether an action is brought against ________________________(guarantor) or whether ___________________(customer) may be joined in </li></ul><ul><li>any such action or actions; and the Guarantors waive the benefit of any statute of limitations affecting their liabilities hereunder or the enforcement thereof. Each guarantor is jointly and severally liable for these obligations. </li></ul><ul><li>Any indebtedness of ____________________(customer) now or hereafter held by Guarantors, is hereby subordinated to the indebtedness of ________________________(customer) to Central Concrete and such indebtedness of __________ (customer) to Guarantors if Central Concrete so requests shall be collected, enforced and received by Guarantors as Trustee for Central Concrete and be paid over to Central Concrete on account of the indebtedness of ___________________ (customer) to Central Concrete but without reducing or affecting in any manner the liabilities of Guarantors under the other provisions of this guaranty. </li></ul><ul><li>Guarantors agree to pay reasonable attorneys' fee and all other costs and expenses which may be incurred by Central Concrete in the enforcement of this continuing guaranty. </li></ul><ul><li>This guaranty shall inure to the benefit of Central Concrete, its successors and assigns. </li></ul><ul><li>In executing this Continuing Guaranty we hereby represent and warrant that at the time of the execution of this warranty we have sufficient unencumbered assets to fulfill the requirements of this Continuing Guaranty. </li></ul><ul><li>IN WITNESS WHEREOF, the undersigned Guarantors have executed this continuing guaranty at ______________, _________ this _______ day of _____________, 20 __. </li></ul><ul><li>__________________Date </li></ul><ul><li>_________________________ Guarantor </li></ul>
  10. 10. Key Points in Joint Checks <ul><li>Consequences if joint check is not issued </li></ul><ul><li>Include guarantee language that binds general contractor </li></ul>
  11. 11. <ul><li>JOINT CHECK PAYMENT AGREEMENT </li></ul><ul><li>Date: 5/28/09 </li></ul><ul><li>Project Name _______________________________________________________ </li></ul><ul><li>Project Address ______________________________________________________ </li></ul><ul><li>Parties to this agreement : </li></ul><ul><li>)Central Concrete Supply Co., Inc. (“Central Concrete Supply”) </li></ul><ul><li>)_________________________________________, Contractor or Subcontractor </li></ul><ul><li>)_________________________________________, Owner/Developer/General Contractor </li></ul><ul><li>This is an unconditional and irrevocable agreement between the three parties above. In order for Central Concrete Supply to furnish materials and services to the project above, and to feel secure in the source of payment for those materials and services, Owner/Developer/General Contractor agrees to issue joint checks payable to Central Concrete Supply and Contractor/Subcontractor for all payments made to Contractor/Subcontractor on account of materials or services furnished by Central Concrete Supply. Owner/Developer/General Contractor agrees that payment for the material supplied by seller shall be made in accordance with seller’s payment terms and in the form of a check payable to “Central Concrete Supply and Contractor/Subcontractor ”. By signing below, Contractor/Subcontractor hereby separately appoints Central Concrete Supply as the party’s attorney-in-fact and hereby authorizes Central Concrete Supply to endorse the party’s names (Contractor/Subcontracto r) to all checks made jointly payable to Contractor/Subcontractor and Central Concrete Supply . In order to carry out this provision of this agreement, Contractor/Subcontractor hereby irrevocably grants to Central Concrete Supply the power of attorney to endorse any and all checks (or similar instruments for the payment of money) in the party’s name which are payable to Contractor/Subcontractor and Central Concrete Supply . </li></ul><ul><li>Nothing in this agreement shall be construed to make Central Concrete Supply a party to Owner/Developer / General Contractor’s contract with Contractor/Subcontractor or responsible for the performance of said contract. </li></ul><ul><li>This agreement does not limit any lien rights that Central Concrete Supply is allowed by statute upon the above project. This agreement is not to be affected by any back-charge, setoff or counterclaim that Owner/Developer or General Contractor has or may have against Contractor/Subcontractor for any reason other than the quality of materials supplied by Central Concrete Supply to this project. </li></ul><ul><li>Central Concrete Supply Co., Inc. </li></ul><ul><li>By________________________________________ Title_______________________ </li></ul><ul><li>Contractor/Subcontractor __________________________________________________ </li></ul><ul><li>Address & Phone __________________________________________________________ </li></ul><ul><li>By_________________________________________ Title_______________________ </li></ul><ul><li>Owner/Developer or General Contractor ______________________________________ </li></ul><ul><li>Address & Phone________________________________________________________ </li></ul><ul><li>By __________________________________________ Title _____________________ </li></ul>
  12. 12. <ul><li>THE SHERWIN-WILLIAMS COMPANY </li></ul><ul><li>JOINT CHECK AGREEMENT </li></ul><ul><li>The “To” line is for the name of the entity who will pay the subcontractor and the “Attention” line is for the person in AP who will actually write the joint check. </li></ul><ul><li>Always send a copy of the signed document to this individual so it doesn’t get lost in the construction trailer. </li></ul><ul><li>Date: ________________ </li></ul><ul><li>To: ________________________________ </li></ul><ul><li>Attention: ___________________________ </li></ul><ul><li>Job Name: __________________________ </li></ul><ul><li>Job Address: ________________________ </li></ul><ul><li>City: _______________________________ </li></ul><ul><li>State: _____________________ Zip: _____ </li></ul><ul><li>In consideration of the Sherwin-Williams Company furnishing materials necessary for the completion of the above-referenced project, the parties signed below do hereby agree as follows: </li></ul><ul><li>1) That all paint and related materials supplied to the subcontractor for the above referenced job shall be billed to the subcontractor and signed for by a representative of the subcontractor or general contractor (G.C.) and/or owner. </li></ul><ul><li>2. That both the General Contractor and the Subcontractor shall be jointly and separately liable for payments to the Sherwin-Williams Company of all bills for said paint and related materials for this job. </li></ul><ul><li>3. That all checks issued by the General Contractor and/or Owner to the Subcontractor in payment for work performed by the Subcontractor on the above referenced job shall be made jointly payable to the subcontractor and the Sherwin-Williams Company. </li></ul><ul><li>In the event of a dispute, copies of all invoices billed to the subcontractor for this job will be provided directly to the General Contractor and/or Owner for their review. Paint and related materials will be delivered directly to the job site, or the job name will be so noted on all of the customer’s invoices. </li></ul><ul><li>__________________________ _______________________ __________ </li></ul><ul><li>Witness Principal/Owner Date </li></ul><ul><li>__________________________ _______________________ __________ </li></ul><ul><li>Witness General Contractor Date </li></ul><ul><li>__________________________ _______________________ __________ </li></ul><ul><li>Witness S-W Credit Manager Date </li></ul><ul><li>If all checks are written jointly, you can deduct what the customer owes and give them the difference. If not, the GC can make periodic payments to the sub for labor and delay payment for your materials </li></ul>
  13. 13. Other Forms of Security <ul><li>Security Agreement & UCC1 Filing </li></ul><ul><ul><li>Attach receivables from project </li></ul></ul><ul><ul><li>Secure hard assets </li></ul></ul><ul><ul><li>Look at position/priority </li></ul></ul><ul><li>Letter of Credit </li></ul><ul><ul><li>Standby, irrevocable </li></ul></ul><ul><li>Payment Bond </li></ul>
  14. 14. Invoicing <ul><li>Specific job information appears on all documents </li></ul><ul><ul><li>Shipping documents </li></ul></ul><ul><ul><li>Proofs of delivery </li></ul></ul><ul><ul><li>Invoicing </li></ul></ul><ul><ul><li>Project Statements </li></ul></ul>
  15. 15. Invoicing <ul><li>Proper shipment date on invoice </li></ul><ul><li>Identifiable products </li></ul><ul><li>Timely production and mailing of invoices </li></ul><ul><li>Mailed to proper address </li></ul><ul><ul><li>Job site? </li></ul></ul><ul><ul><li>Corporate offices? </li></ul></ul><ul><ul><li>General Contractor </li></ul></ul>
  16. 16. Watch Timelines <ul><li>Timely filing of Preliminary Notice </li></ul><ul><li>Notice of Completion Filed—when?? </li></ul><ul><li>No Notice of Completion </li></ul><ul><ul><li>How long have you been off the job? </li></ul></ul><ul><li>Filing Lien </li></ul><ul><li>Serving Stop Notice </li></ul><ul><li>Get to attorney to act on lien or stop </li></ul>
  17. 17. Product Shipped, Payment Made <ul><li>The Silent Hero….. </li></ul>