A Credit Association – Infancy to Abuse

Going back in time – February 1875 – the owners of seven manufacturing companies in the New York City area got together as they often had. This time their conversation turned to a problem that had emerged when they started to experience customers not paying for their goods on a timely basis. They had come to realize not all people are honest in their business dealings. These manufacturers sold their products to their customers, who in turn sold the products to the end user. The realization of dishonesty among customers was determined to sometimes be intentional, but not always. Some of their customers were considered dishonest because they failed to pay for product on a timely basis – realize that this was back in time when a man’s hand shake was his word, and did not need the lengthy contracts of today, that are often difficult to understand with all the legalese.
These manufacturers found they could sell more products if they allowed their customer to pay for the goods after they received them and had a chance to sell them. That is when selling on open account terms was born.
During the meeting, they decided it would be to their benefit if they were able to create a central point where they could submit their customers’ payment histories, and they could contact one location rather than call several manufacturers to see how they were being paid by a particular customer. This central point of information would also let the manufacturers know when another had a problem with a customer such as had a bad check, had to place them for collection or write off a balance they could not collect.
Why would they want the other manufacturers – especially their competitor – to know one of their customers was not paying? Why not let the customer go to the competitor and give him the problem? These manufacturers learned, as have wholesalers and retailers, if a customer has not paid you for product and he is in need of more, he could go to your competitor and purchase a product similar to what he had purchased from you. This allowed the purchaser to go for quite a while without needing to pay to get more products.
A new day was born – a day when it was possible for manufacturers, and even wholesalers, were aware that the customer was not able to obtain product from their usual source. Salesmen did not care for this new ability of sharing payment information, because now manufacturer B was less likely to replace manufacturer A since A was not shipping due to a past due status.
Hence was born, on that February day in 1875, an organization that was known as the Stationers Board of Trade. Several months later, the organization was incorporated as a not-for-profit company.
As the years progressed, other industries realized – from talking to members of the Stationers Board of Trade – that they needed this kind of information, so the Stationers Board of Trade added additional manufacturers of products that were used in business. With the expansion of products that were now a part of the “Group”, it was decided to change the name of the organization to Stationery & Office Equipment Board of Trade, Inc.
In 1992, many industries were served by the by the association. It was this year that several manufacturers from another industry decided they would benefit from becoming a member of this association. It was time to come of age, and so it was that the name of the Stationery & Office Equipment Board of Trade, Inc. was amended and changed to Business Products Credit Association, Inc. (“BPCA”). In this same year, BPCA introduced a more efficient system for members to be able to obtain the payment histories of customers online.
Membership continued to grow, through word of mouth of the members. The members of the organization talked with non-member companies when calling them for credit references and introduced them to BPCA. This is a member’s organization, and the members realized the need for them to promote BPCA. In getting more members, they were improving the information they were receiving because there were more data submitters.
Does the story end here? No, there are still more improvements to be made as technology increased. Will there be an end? It is doubtful – if an organization gives up on technology and remains static, it will die. The next big item in credit determination is Customer Credit Scoring. Scoring helps you to be consistent with your determinations as to allowing open account credit terms to customers – based on the Credit Policy of your company.
In 2007, BPCA partnered with another company to increase the data base of payment information for members. While not vital, it can make a credit department’s job much easier. However, BPCA still wanted to keep the industry segment information segregated so their members were still aware of how the customer paid within the industry. Together we have created a system to allow BPCA to have the industry specific information plus ALL creditors of the customer. This gave a broader scope of how invoices were paid. In addition, the report contains two customer payment scores – one for only the industry and another that includes all creditors reporting.
That brings the Credit Trade Association, BPCA, up to today’s status. It is still through the members telling and promoting the value of BPCA that adds to the growth of information available on the reports. Granting credit has not changed since those early days of 1875, but the method and convenience of obtaining the information to make a determination as to how much credit exposure your company wants to support has changed immensely. Is BPCA finished making improvements in providing what the Credit Manager needs? No, not by any means. Time and technology will continue to make progressive changes, and BPCA wants to do all it can to provide the best information for all subscribers and members.
There are all kinds of credit organizations in today’s world, but none as old as BPCA. BPCA has always touted the “family” feel of the organization. This is still the way it is looked at, however with the reduced travel of many of the members, meetings at a location have given way to meetings by the means of conference calls.
There is an annual fee to be a member of BPCA, but while other credit organizations have increased their membership fees over the last 16 years, BPCA has not had an increase in membership fees since they reduced them 19% in 1993. Some credit organizations are local or do not have national industry specific groups as BPCA has. BPCA will have five Industry Group Interchange Meetings in 2009 by conference call. There will be one meeting in Philadelphia, PA in October of 2009. These meetings allow the attendee to provide and get information that is not on a credit report. Members are encouraged to participate in the Group Interchange Meetings as often as possible.
BPCA is an organization that works for the Creditor in several ways. Not only does BPCA provide payment information, Alerts (members and BPCA enter on customers) and Interchange Meetings, BPCA personnel will work with distressed Debtors – out of Court if possible – in an effort to keep them a viable customer for the members. If the Debtor is not able to continue in business, BPCA will work with them in liquidating their assets to give the greatest benefit possible to the Unsecured Creditors.
Are you getting all you can from your credit organization? A credit organization can provide just about everything the credit professional needs, but if that professional does not get involved with the credit organization, they are not getting all they should. Talk with one of the staff of BPCA to see what you can get as a member of BPCA.
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This article has been written by Dave Schmucker, President of BPCA since 1992. Dave was a Corporate Credit Manager and a member of this organization from 1973 until he was hired as President in 1992. The writer has worked or been involved in credit over forty-five years.