CREDIT CORNER

Suggested Steps for More Profitable Credit Control

 

 

1)         Anticipated Risk and Credit Exposure

            In expanding your sales market, management should expect an increase in the number of past-due accounts.  By accepting this policy, it should also determine the degree of risk or credit exposure the company wants to take.  Once this has been agreed upon, a definite accounts receivable collection program much be established for effective, maximum results.

 

2)         Collection Follow-up Policy

            Past-due accounts are "frozen investments."  Quick recognition of delinquent receivables as fast follow-up ensures maximum recovery with minimum collection costs or charge-offs.  A definite, firm collection program will quickly make your past-due customers aware that you expect prompt payment.  Everyone recognizes that a delinquent dollar is worth less an time goes on.  When customers ignore requests for payment, issue bad checks, or don't keep their promises, such accounts always require consideration for more vigorous collection action.

 

3)         Simplified Collection Procedures by Aging Receivables

            Develop and maintain a regular monthly age analysis list of past-due accounts.  This will help you recognize where and when your best collection efforts may be needed.  Your results will also alert you to the chronic excuse-maker as well as the potential problem account.  To supplement the aging list, an alphabetical, loose-leaf binder or card set may be maintained for each delinquent account.  This system will provide you with a chronological record and enable you to more efficiently and quickly see the results of your day-to-day collection efforts.  As an "activity control work record," your list will help pinpoint which account should receive routine or special collection attention.

 

Because credit and collection departments represent only a part of any business organization, its practices much complement the firm's general policies.  All sales of goods or services ultimately call for settlement by payment of the account according to prearranged, specific terms.  Management at all levels must, therefore, realize that collection of payment has been made and the money is in your bank.