1. CREDIT AND SALES WORKING TOGETHER FOR PROFIT (BEST PRACTICES AND LEGAL CONSIDERATIONS) Amber Tallmadge atallmadge@centralstatesmfg.com David Feigenbaum dfeigenbaum@kichler.com Scott Blakeley, Esq. SEB@blakeleyllp.com

2. What are every organization’s goals? SALES PAST DUES SALES PAST DUES

3. Today’s Focus Understand the relationship between Credit and Sales Know the respective functions and goals of credit and sales Streamlining the relationship: suggestions to eliminate discord between credit and sales Get the Message Across Communicate…. Sell YOUR Value Strengthening and Capitalizing on the Relationship Educate Sales on the Fiduciary and Legal Responsibilities of both Departments

4. Credit and Sales, are the Priorities Really That Different? Credit and Collections Meet financial objectives Provide timely decisions Maximize Profitable Revenue, Managed Risk Provide a fair, consistent and predictable credit Policy Customer Service Keep stakeholders informed Provide a unique expertise to approve and retain customers Proactive An agent for process improvement Sales Meet sales objectives Deal with fast paced competitive environment Profitable sales Want a fair, consistent and predictable credit Policy Customer relationships Be knowledgeable about account status Able to identify “real” opportunities Avoid shipment interruptions Timely, accurate processes

5. Understand the Relationship Between Credit and Sales Know the respective functions and goals of Credit and Sales Encourage a mutually beneficial relationship:  It starts with “Organizational Buy-in” at the top  Define shared goals  Understand your company’s business and the competitive context  Understand your potential to drive revenue and good “business decisions”  Understand what motivates a Sales Representative, a Sales Manager, the General Manager

6. Understand the Relationship Between Credit and Sales Know the respective functions and goals of Credit and Sales What a credit professional has to offer:  Professional knowledge  Understanding of your company and the customer practices  Credit/Collection Information and trends  Early visibility to risks and opportunities  Internal control, process and regulatory compliance issues  Best practices and benchmarks-  Creative credit policies  A key factor in customer service

7. Understand the Relationship Between Credit and Sales Know the respective functions and goals of Credit and Sales What Sales has to offer:  Understands the competitive marketplace  First to know about potential business opportunities  Understands your company and the customer practices  Maintains the customer relationship and potential leverage  Early visibility to risks and opportunities  Generates revenue

8. Streamlining the Relationship Suggestions to eliminate discord between Credit and Sales Get the basics in place:  Establish that the credit department is a “profit center”  Be perceived as an ally to the Sales Team  Your priority should be company profit and meeting both sales and financial objectives Leverage technology:  Share collection history and notes  Timely alerts  Internal shared drive or portal

9. Streamlining the Relationship Suggestions to eliminate discord between Credit and Sales Be involved at the front end Implement a well thought out and communicated credit collection policy:  Ensure Fair, Predictable and Consistent decisions  Incorporate both Sales and Finance considerations  Provide exception override authority by credit analysts and manager  Business decision escalation workflows Approved at the top “This is how we do business”

10. Credit Management is Sales What do you sell? How best to get the message across?

11. Sales Should Know What You Have to Offer is of Value

12. Get the Message Across Communicate…. Sell YOUR Value Keep Sales Informed: Explain the credit decision process and the impact timely collections has on profit Broadcast: “Credit is not the sales prevention bureau. Let Sales know, if you don’t sell it, we have nothing to collect Keep Sales up to date on account status: Especially if Commissions are contingent on collections Credit holds: No secret. A last resort

13. Get the Message Across Communicate…. Sell YOUR Value Be Part of the Process and the Sales Team  Attend Sales Team meetings and events  Invite Sales to Credit Team building events  Travel with Sales  Focus on customer facing processes and a high level of customer service and satisfaction  Attend industry conferences, trade shows and marketing events  Understand Sales’ needs and pressures……Listen!

14. Practices Credit and Collections Need to Avoid Holding orders unnecessarily Passing customers with complaints from person-to-person and department-to-department Taking a long time to resolve disputes, discrepancies, and deductions LISTEN TO YOUR CUSTOMER!!!!

15. Strengthening and Capitalizing on the Relationship Information and role-sharing to bridge the gap between Credit and Sales Develop working relationships:  With individual Sales Reps, Sales Managers and Marketing Reps  With customer’s AP, Vendor Compliance, key users, owners etc. Relevant and timely decisions  Be there at the beginning: No Surprises for Sales  Involve the sales people in the difficult credit decisions.  Provide choices  Allow discretion  Be prepared for exceptions

16. Strengthening and Capitalizing on the Relationship Information and role-sharing to bridge the gap between Credit and Sales Establish your value as a go to person  Be open to collaboration in both directions. Never say no. Say yes but how?  Educate Sales on options to unsecured open terms Be professionally prepared  Keep up with professional education  Participate in NACM Industry Credit Groups  Network  Understand your industry benchmarks  Understand available resources  Be an agent of change and improvement

17. Strengthening and Capitalizing on the Relationship Information and role-sharing to bridge the gap between Credit and Sales Travel with your sales people. Prepare for customer visits by examining the customer’s buying patterns as well as their payment patterns Visit customers who pay well to thank them for their payments and their purchases. Help Sales increase volume with good paying customers Reexamine credit lines in advance of visits so that you are ready to support increased purchases Know your customer base. If different types of customers have different major influences (seasonality, etc.) be aware of those factors Ask your customer:“How are we doing? How do we compare as a supplier?” Tell Sales what you learn

18. Strengthening and Capitalizing on the Relationship Information and role-sharing to bridge the gap between Credit and Sales Provide actionable and timely information:  On risks and potential credit holds  It is not always bad news: Keep Sales informed of opportunities to sell more  Reports of trends and performance Compare Sales Team and Sales Rep results  Are the Goals of both functions in alignment?  Work toward goals of mutual benefit  Make sure Management hasn’t placed each group in a position to oppose the other.

19. Credit and Sales can work together to turn credit policies into a tangible competitive advantage Establish Credit as a Product:  Be open to creative solutions and options  On-the-shelf securitization and guarantee options  Partial advances  Escrow arrangements  Third party checks  Documentary credits  Accelerate terms to lower exposure but get the business  Be aware of supply chain financing options

20. Terms Pushback Strategy (TPS) For many customers, extending payables has become a best practice Small and medium sized customers find bank financing difficult, forcing vendors to be last source of financing Big businesses sitting on record cash holding but increase the days to pay vendors

21. Educate Sales on the Fiduciary and Legal Responsibilities of Both Departments Complying with the antitrust laws  Sharing industry group information  New account set up and gathering customer information  Customer credit terms pushback  Working with the delinquent account The Sarbanes-Oxley Act and the sales team's pledge of no ancillary agreements with customers Credit, Sales Cooperation when a customer exerts a payment terms pushback strategy The importance of cooperation if a bankruptcy is looming

22. Contact Information Scott Blakeley, Esq Founding Partner, Blakeley LLP 18500 Von Karman Ave, Suite 530 Irvine, CA 92612 seb@blakeleyllp.com (949) 260-0612 David Feigenbaum, Director-Corporate Credit Kichler Lighting 7711 E. Pleasant Valley Rd, PO Box 318010 Cleveland, OH 44131 dfeigenbaum@kichler.com (877) 704-6551 x6772 Amber Tallmadge Central States Manufacturing 302 Jane Place Lowell, AR 72745 atallmadge@centralstatesmfg.com (479) 770-0188 x3129

23. Reference Materials

24. Credit Enhancement Decision Tree

25. Show Sales Reps New Business Required to Offset the Cost of Write-Offs

26. U.S. Public Companies with Industry Leading DPOs

27. Terms Pushback Strategy (TPS)

29. Vendor Strategy for Dealing with TPS

30. The Credit and Sales Team’s Anti-Trust Flow Chart

32. Using the Credit App to Document the Credit Sale