When do you know it's time

Since last month, I was always asked by my colleagues in the industry to come up with series of articles that will benefit our industry especially in the credit and collection profession. I think credit and collection, as a profession is one of the most “underrated” groups of men or women in the industry. However, due to the so-called “economic shifts and financial crisis” there are now a lot of collection problems and delinquencies that we are encountering. 

Now, the simple question is, how would you know its time to do some reinforcements or escalation in your credit and collection? What are the signals that will give you what we call in the industry as “storm warnings” for you to be more efficient and effective in doing receivables management. A competent Credit and Collection Manager should be able to identify these danger signals in its earliest stage as possible. So, to be able to maintain a healthy Accounts Receivables, below are some “Tip-offs to Possible Trouble for Outstanding Accounts:

1. Evidence of delinquencies – delayed payments, bounced checks, more frequent requests to “hold on to depositing the check”.

2. Deteriorating relationships – calls, not being answered, more “unavailable, out of the office or busy” reasons for not seeing you.

4. Defaults on payment commitments, violations of terms and conditions or written agreements.

5. Failure to avail of discounts and/or rebates.

6. Loans where more than a single source of repayment cannot be easily or realistically identified.

7. Substantial jumps in the size of single orders or contracts which would strain existing productive capacity.

8. Speculative inventory purchases out of line with normal purchasing practices or established maintenance levels of the company.

9. Inability to obtain merchandise stock on regular trade terms.

10. Customer’s unrealistic low pricing of goods and services under the guise of break-even volume levels essentials to keep the business operating.

11. Loss of key product lines, franchise, distribution right/sources of supply.

12. Marked changes in the timing of seasonal loan requests.

13. Sharp jumps in the size of loan/ credit line request.

14. Loss of one or more major, financially sound customers.

15. Notice of insurance cancellation for failure to pay insurance premiums.

16. Commitments to projects/ ventures promising exceptionally high/unusual profit potential.

17. Neglect or discontinuance of profitable “bread and butter” lines.

18. Delay in reacting to declining markets or economic conditions.

19. Lack of visible management succession.

20. One-man operations showing growth patterns that strain the capacity of the owner to manage and control.

21. Appearance of other creditors/ lenders in the financial picture, especially with pledged/mortgaged assets in preference to your own lending which is unsecured.

22. Speculative tendencies - desire and insistence upon taking unrelated business gambles/risk.

Again, I personally believe that, as credit and collection executives, the responsibility of maintaining the steady inflow of cash that powers the other activities within our respective organization rests upon our shoulders.

For credit & collection (C&C) questions, comments and rejoinders please call or text 0917-7220521 or email at [email protected]