By Dawn Kristof
"Nice people sue each other," opined Wayne Kreuscher, attorney at Barnes & Thornburg, in describing one of the 10 simple rules that should be considered when negotiating terms and conditions. His message was conveyed to an audience of industry finance officers, credit managers and contract administrators during the inaugural meeting of WWEMA's Financial and Contract Administrators Council held on April 5-6 in Indianapolis.
The gathering was a first for WWEMA in its effort to bring together professionals with financial and contractual responsibilities in the water and wastewater industry, to share their knowledge, experiences and concerns and to seek solutions to the challenges they face in their day-to-day operations.
Kreuscher offered advice on the "10 Hot Oral Words" and the "20 Hot Written Words" that should be flagged when negotiating a contract for the sale of equipment and processes for water and wastewater applications. He recommended the audience read two documents published by WWEMA which he found to be excellent tools for limiting contractual liability on the part of equipment manufacturers, they being WWEMA's "Supplemental Terms and Conditions" document and "Manufacturer's Concerns on Risk Allocation in the Water and Wastewater Equipment Industry."
Negotiating contracts was one of four topics addressed during this two-day forum. Another session dealt with creative financing options from use of the U.S. Export-Import Bank's environmental export credit insurance, offering international customers open account credit on terms up to 180 days, to alternative financing tools offered through the private sector.
"It is vitally important to provide your customer with the extended term financing they require in order to not only win the initial order but to have a long-term strong relationship which precludes the competition," noted Stephen Sohn, president of Global Services, Inc. He described several of these financing "tools" including public and private sector risk insurance; commercial bank loans; bond offerings; leasing; forfeit financing; and private placements.
"Financing resources available in support of water and wastewater equipment sales are quite diverse and should be proactively pursued to be a winner in the massive global marketplace," he said. "Companies that are most successful in international business are those that do not wait to react to the market's demands, but have taken a proactive approach in using extended payment terms, countertrade and other non-traditional marketing tools to secure the order."
Managing credit and exposure in the global market was another subject of discussion during this forum, with Ariel Silva of Marsh USA offering advice on avoiding, transferring and separating one's exposure to seven general categories of risks once companies leave the comfort of the United States: property; transportation; liability; political; credit; personnel; and crime.
Anne Turner of Bank One offered insight on ways to obtain foreign credit information, factors for determining the appropriate method of payment to be required of the customer; and tools for managing foreign exchange risks.
Regardless of due diligence on the part of the financial officer, contract administrator and/or credit manager to work out favorable terms and conditions, limit risks and ensure credit worthiness on the part of a potential customer, there will always be that one bad apple.
"If they are going to rob Peter to pay Paul, BE PAUL!" said Janis Lundquist, President of Lienguard, who advised the audience on ways to collect on past debts through use of bonds and liens. She distributed a booklet listing state-by-state time requirements covering mechanics liens as well as public liens and bond claims pertaining to commercial/industrial sales.
"Only 22 states allow you to lien for municipal contracts," she noted, "though there are other means to collect on municipal projects that are equally successful."
Avoiding the need to issue liens is everyone's preference, observed Barb Lahtinen of the National Association of Credit Managers, who described a service offered by her association which helps companies find out how their competitors are being paid.
"Reporting factual data on the payment history of your customers is not a violation of anti-trust laws," she observed when describing how manufacturers of water and wastewater equipment could join together to form an industry credit group that tracks and reports on their customers' payment habits.
Attendees at this first meeting of the WWEMA Financial and Contract Administrators Council were enthusiastic with having established a network of colleagues from which to draw knowledge and guidance on how to better perform their duties as the frontline defenders of their company's financial assets. They agreed that the Council will serve a vital resource in their professional development and agreed to conduct future meetings focusing on such topics as retainages, contract negotiations, hedging foreign currencies, utilizing freight forwarders and managing cash flow.
About the Author:
Dawn Kristof is President of WWEMA. For further information about the WWEMA Financial and Contract Administrators Council, contact Kristof at 703-444-1777; e-mail [email protected].
