USA Credit Application

[Apprentice]

Is it ever appropriate to assign credit using the credit application of an entity that is not the same name as on the orders? I have been doing accounts receivable for over 3 years for an advertising agency. Our customers are either the end consumer businesses for whom we advertise, or other middle man advertising agencies. Some of these middleman agencies are related to the end business, they are separate entities set up by the business to act as their advertising agency, and this agency purchases from us. I work for a company where the owner favors sales over accounting, and sales often sells deals where the contract says due upon receipt but they tell the customer they can pay net 30, and im the one stuck in the middle trying to collect as due upon receipt. Sales sometimes tries to get me to run a credit app with name and references of end business, in order to apply terms to the agency on the order, or to run a credit app for an agency they are dealing through when the order has the name of the end business. And the agency and business are not always related, sometimes its just a random ad agency that advertises for various clients in various industries. Is it ever an appropriate practice to assign credit like this? Ive declined running three credit apps so far, telling sales and the customer that these are not valid credit applications. One customer tried to get me to run a credit app based on an application they had submitted giving permission to another vendor. Again stuck to my guns and refused to process. This is my first accounts receivable position. Im searching for guidance.

 

[DerrickWD]

I'm sure you'll get better advice from someone more experienced, but to me this doesn't sound like something where you are bound by accounting rules or principles. You should probably follow the rules, procedures, or guidance that management sets out for you. If they want you to do it that way, then you probably should. I could be totally wrong, though, and don't want to advise you to do anything unethical. But I would raise your concerns internally, if I were you. Is there anyone in the accounting department you can talk to about this?

 

[Apprentice]

I'm sure you'll get better advice from someone more experienced, but to me this doesn't sound like something where you are bound by accounting rules or principles. You should probably follow the rules, procedures, or guidance that management sets out for you. If they want you to do it that way, then you probably should. I could be totally wrong, though, and don't want to advise you to do anything unethical. But I would raise your concerns internally, if I were you. Is there anyone in the accounting department you can talk to about this?

I used to report to the CFO. He was very good with guiding the acctg dept. He left in October. Now Im taking direction from heads of sales and the owner. I brought this up to the owner and I have no clear direction yet from the owner other than that he said he needs to confer with head of sales to explain what they want to do. Im trying to find out if running credit apps like this is something we should do and if it could be held against me in the future, should anything go wrong with these accounts. I no longer have a supervisor I can go to for guidance. Accounts receivable having to answer to sales sounds like a company conflict of interest to me.

 

[Apprentice]

It has always been my understanding that accounting is supposed to be a check and balance upon things that sales tries to do.

 

[DerrickWD]

I agree. That is a poor control environment setup. Sales shouldn't have access to or influence over the record keeping function.

Well I hope you get an experienced A/R person to answer your question on here.

 

[Apprentice]

In addition sometimes we get orders that are in the name of the end business, but I am to address invoice and coordinate payment through middle agency. Or vice versa. (We advertise for car dealerships. Some have their own ad agencies set up that act on their behalf as separate entities). As often as I can, when this happens, I try to get salespeople to go back and get the company name on the contract/order changed, and the contract re executed. But they always whine and say how its not going to be good for relations, or too hard or not a good idea to do, etc. Sometimes I cant get the correct documentation out of them and just have to go forward as is because the order is being fulfilled, and just cross my fingers and hope for the best that I wont have to use the executed order as backup documentation on any payment dispute.