1. Scott Blakeley, Esq. Partner Blakeley, LLP SEB@BlakeleyLLP.com
Setting Up The New Account:  Best Practices and Legal Considerations for the Credit Team
Scott Blakeley, Esq.
Partner
Blakeley, LLP
Susan Archibeque
Director of Credit,
Nicholas & Company, Inc
Amber Tallmadge
Corporate Credit Manager
Central States Manufacturing

2. Setting Up The New Account

3. Six “P’s” of Credit People (who’s running the business)
Setting Up The New Account
Six “P’s” of Credit
People (who’s running the business)
Profit (your margins)
Payment (track record, new financials)
Protection (security obtained)
Politics (country conditions)
Perspective (assessment of earlier “P’s” taken together, cost-benefit analysis)

4. Credit Policy Set the appropriate risk and exposure for a customer
Setting Up The New Account
Credit Policy
Set the appropriate risk and exposure for a customer
Protect company assets
Limit write-off exposure
Reduce likelihood of aged invoices
Assist the sale’s team in growing profitable accounts

5. Traditional Information Sources

6. Social Media Sites for The Credit Team

7. What to look for when credit team does not have financial information?
Setting Up The New Account
Key Ratios
Types of Financials:
Audit:
Unqualified Audit
Qualified Audit
Adverse
Disclaimer
Other:
Reviewed
Compiled
Company prepared
Liquidity
Activity
Leverage
Operating Performance
Cash Flow
Accounting
Income Statement
Statement of Owner’s Equity
Balance Sheet
Statement of Cash Flows
What to look for when credit team does not have financial information?
Sales volume
Company size

8. Credit Scoring Setting Up The New Account
Payment predictability/collectability
Ultimate solvency/insolvency
Training and guiding new customers
Identify traits of desirable customers
Identify traits of undesirable customers
Creates a database for flexible reporting
Automated versions save the time
Allows comparison of customers with similar traits
Manage risk by segment or characteristics
Ability to adjust risk by adjusting model components
Internal vs. external data inputs

9. THE CONTRACTUAL DOCUMENTS THAT GOVERN THE TRADE RELATIONSHIP
Setting Up The New Account
THE CONTRACTUAL DOCUMENTS THAT GOVERN THE TRADE RELATIONSHIP
Sales team
Information
Credit team pref
Credit team
Credit Application
Information &
T’s and C’s
Who has the Trade Leverage?
Indispensable customers or key supplier?
Sales team/customer pref
Offer to buy
An acceptance of an offer to sell
Confirmation of a verbal agreement
New Account
Set up
P.O.’s and Invoices
Customer pref
Customer-Supplied Vendor Contract

10. Setting Up The New Account

11. Setting Up The New Account
Credit Enhancements

12. Tax Exemption Certificates
Setting Up The New Account
Tax Exemption Certificates
Collection of certificates as part of the new account set-up process Validation of certificate Maintaining the certificates for easy retrieval Monitoring expiration dates
MATT
The sales tax exemption certificate process becomes part of a cycle. In most companies an exemption certificate if collected from the buyer at the time the account is set up. It is normally filed, with little or no review. Best practices show that collected exemption certificates should not be just filed away. After collection they should be reviewed by a team trained in looking for a complete/valid form. If they are truly valid, then they should be archived for later review. Companies should periodically review accounts for expiration of exemption certificates or set up a regular schedule to collect all new forms from the customer base. Older forms should be maintained on file in case of an audit of prior periods.

13. THE ANTITRUST LAWS AND THE NEW ACCOUNT SET UP
Setting Up The New Account
THE ANTITRUST LAWS AND THE NEW ACCOUNT SET UP

14. Setting Up The New Account
Legal Considerations
The Electronic Signature in Global and National Commerce Act (E-SIGN)
The Equal Credit Opportunity Act (ECOA)
The Fair Credit Reporting Act (FCRA)
Sarbanes-Oxley Act (SOX)