One of the relevant facts of this essay is that Kathy Ryan is a trade credit officer with Diversified Consolidated Corporation where she is responsible for credits to North Manufacturing of approximately $ one million. Another relevant fact is that North Manufacturing, whose treasurer is Scott Bradley, has been receiving most of its supplies from Diversified Consolidated Corporation. In fact, North Corporation uses Diversified Consolidated Corporation as a credit reference to other suppliers. It is also a relevant fact that North Corporation is currently in financial trouble and is not in a position to pay its creditors on time. In fact, it has outstanding payables to Diversified Consolidated Corporation. Basic Products, whose credit manager is Mike Walman, is the other supplier who could supply to North Corporation. Thus, since Scott had informed the purchasing department to place an order with Basic Products instead of Diversified Consolidated Corporation, it was a policy that Mike would call Kathy to get North’s “prompt payment history”. Considering that Kathy was aware of the financial situation at North Corporation, this situation put her in an awkward position, because if Norths credit went bad, she would lose her annual bonus of twenty-five percent of her compensation and worse still, she could be fired. After clearance from Kathy on North’s “prompt payment history”, Mike was happy to know that he could trust them with credit.
How I would act if I were at Mikes Position
Being the credit manager at Basic Products and I have received such a huge order to supply North Corporation through the end of the year, I would contact other common suppliers to North Corporation to know their history on prompt payment. Thus, it is commendable that Mike went looking for information on North’s. I would also not rely on the response of one supplier since they could have colluded like in the case of Kathy and Scott. I would also request for the current audited financial statement of North Corporation to get it analyzed to know their financial position before giving such a huge credit facility. I would also request North Corporation to request their orders on a monthly basis so that in case they default on the first month we stop the supply. This will help us not incur huge outstanding payables. Lastly, given that there are rumours floating around on the financial inability of North Corporation to pay its debt, I would forward this issue to the top management and owners of our company for approval. In my position, I would not approve the supply of such a huge order on credit to customer who has not been regularly transacting with us.
How I would act if I were at Kathys position
Being the trade credit officer with Diversified Consolidated Corporation and we have a huge outstanding payable with North Corporation, I would immediately stop all credit supply to them. Secondly, I would request for a meeting with them to know their position regarding the outstanding payment. Although it is unethical, I would refer them to other suppliers by not disclosing their financial position since if they get supplies elsewhere, they are likely to clear the outstanding debt and secure my employment. Lastly, I would report the case on the false financial statement they provided to us to our top management and the legal department for appropriate action to be taken.
The possible alternatives to solve the situation is for North Corporation to look for supplies elsewhere and see if they can revive their business. They can also apply for a loan facility from any bank so as to pay their outstanding debt and continue getting supplies. Another alternative is for the management of both companies to enter into a mutual agreement to become partners in the business since Scott has hinted that with continuous supply they can get back to track. Lastly, if North Corporation cannot succeed in any of the above options, they can simply sell their business out and pay their debts.