An Interview with John Rocktoff
Quickly
and simply, here is why the credit department is
important to Elf Atochem North America:
Our largest customer orders up to $19 million worth
of Forane refrigerants during its short busy season.
The customer receives these shipments and charges
them to its credit line with our company. From the
time the last shipment is sent to the time we are
paid, we have a risk exposure of up to $19 million.
The credit department is responsible for approving
and minimizing Elf Atochem's risk if the customer
can't pay.
"Dun and Bradstreet recently reported that
business failures for the first half of 1996 are up
17 percent compared to 1995," said John
Rocktoff, director of credit for Elf Atochem North
America.
"That figure concerns us and helps to
illustrate the importance of what we do. We have
more than 10,000 active accounts spread among 15
business units. With such a high national business
failure rate, we want to be very sure that the
companies we're extending credit to are
secure."
Our corporate credit department strives to provide
assurance that credit is only offered to companies
with the ability to repay. They serve as a
preventative measure. They address problems before
they occur.
"Our job is to protect the company's
assets," said Rocktoff. "From the time of
the sale, we are basically making a loan to the
customer and saying, 'Here is our money, you can
have it for 30 days.' Our success depends upon our
ability to assess the value of the sale versus the
risk."
The concept makes perfect sense so far, but how can
the credit department be sure that a customer will
pay its bills?
"For our typical accounts, those with $50,000
to $100,000 lines of credit, we first get three
trade references and a bank reference. This gives us
a sense of their credit history," said Rocktoff.
"If the account is larger than $100,000, we ask
for their audited financial statement."
The credit department uses Dun and Bradstreet and
other credit reports to determine risk. Elf Atochem
is also a member of the National Chemical Credit
Association (NCCA).
'We have been very active with the corporate quailty
team to reduce working capital," said Rocktoff.
"One of the ways we contribute is to reduce the
time it takes for customers to pay their
bills."
Days Sales Outstanding (DSO) is the amount of time
it takes for a company to receive payment after an
invoice is generated. A primary goal for the credit
department is to reduce DSO.
"By reducing our DSO, we can reduce our average
credit exposure," said Rocktoff. "This
means that we have more cash in our hands and less
in the accounts receivable column of our balance
sheet. We can make a significant contribution to
reducing our working capital."
Why should you care? Because by reducing working
capital, Elf Atochem North America reduces the
amount of money needed to run the business and can
allot the savings toward interest-bearing
investments. This improves our returns on
investments.
"Our approach toward credit is a great deal
different than what many people here are used to.
We're using advanced software packages, paperless
record keeping and a new corporate credit policy
that has been approved by the Executive
Committee," said Rocktoff. "We want to
confidently assure each business unit that when we
apprve a credit line, it has been thoroughly
researched and, if necessary, secured."
For more information about the Elf Atochem credit
department or for a copy of their credit policy,
contact John Rocktoff at (215) 587-7381.
