Seminar Addresses Collections and Cash Flow
About 30 designers, manufacturers and industry executives turned out to discuss collecting on past-due invoices and increasing profitability at a July 29 luncheon seminar sponsored by the California Fashion Association, Fashion Business Inc. and the California Market Center in Los Angeles.
“Increased Cash Flow and Profitability” featured Robert Prather, president of A/R Management Services, a La Verne, Calif.–based company specializing in accounts receivables and charge-back consulting, and attorney Ronald Slates, whose Los Angeles company, Ronald P. Slates P.C., specializes in business litigation, including real estate and bankruptcy litigation. The event was held in the CMC’s fashion theater and was catered by Fashion Bistro, a French cafeacute; based in the CMC.
“There’s no way to avoid charge-backs—it’s part of doing business,” Prather said. “However, it is possible to address items internally to reduce the amount of charge-back you’re dealing with.”
Among Prather’s suggestions:
bull; Keep detailed logs of customers’ terms and return authorizations.
bull; Make sure the person in charge of chargebacks has the time and resources to properly follow up and develop relationships with retailers. “Letters are great, but they will not collect money,” Prather said.
bull; Get the whole company involved. “Even a valid charge-back can be very valuable,” Prather said, explaining that valid charge-backs will point to shipping errors and other inefficiencies.
bull; Get all agreements in writing, and keep a file of all correspondence with the retailer. “As long as you have something in writing, you will get paid,” he said.
bull; Familiarize yourself with retailers’ shipping guidelines. “I don’t think the retailers are out to get us,” Prather said. “It’s important when you’re starting out to know your retailers and know what they require.”
Slates discussed how to prepare for a collection case. He recommended clients prepare a master purchase order listing their requirements and responsibilities and keep extensive collection files.
He also pointed out a few pitfalls to avoid:
bull; Make sure you correctly identify your company and your account’s legal business name.
bull; Decide the terms of the debt by keeping copies of the master purchase order and the original credit application.
bull; Identify the proper jurisdiction. Slates said he prefers to file these cases in California, to take advantage of California companies’ legal right to attach a writ of attachment, which can help collect monies owed by seizing property that would settle the claim.
bull; Determine whether there must be binding arbitration and where that arbitration will be held. “If you are on the receiving end of a New York purchase order, read it carefully. They are famous for binding arbitration agreements that will drag you back to New York,” Slates said.
bull; Be prepared to turn down an order. “You have to learn to say ’no’ to an order if the terms are so draconian,” he said.
“[Companies should] establish a collections strategy with a specific timeline for getting specific answers to specific questions,” Slates said of companies trying to collect on a purchase order. “[And] when amicable attempts to collecting your debt fail, you must form a litigation strategy.”
In Southern California, claims for amounts less than $5,000 are referred to small claims court, and larger claims are referred to the Los Angeles Superior Court, Slates explained.
The seminar was part of an ongoing series of business talks organized by the CFA. “If we can’t answer your questions, we certainly know who can,” CFA Executive Director Ilse Metchek said.
The CFA’s next luncheon seminar will focus on licensing and feature Cherokee Inc. Chairman and Chief Executive Officer Robert Margolis. The organization is also planning to reprise its popular panel discussion on public relations, “Hype: What Is It Worth?” —Alison A. Nieder
