Why is our delinquency increasing?

I had a meeting with a client last week and one of the questions he asked me was that: how to control their delinquencies? Or why is our collection problem keeps on increasing? Now, this kind of questions is a common question in my line of work. Almost every time I hand my calling card and when they read or hear that I am an executive of CIBI Information, the leading credit information and receivables management company in the Philippines, they often ask me these kinds of questions. My standard answer to them is; “where do you think it is coming from?

For me, controlling delinquency is just a “knee-jerk” reaction to the real problem. I always believe that the real problem is more serious than what it looks. In my previous columns, I have already made mention that it only could be coming from two (2) possible causes: the internal cause and external cause. Internal causes are “lapses” that are made or committed by the person assigned or is in-charged to do something. This could be as simple as absence or insufficiency of a credit report, poor credit evaluation, over confidence in credit granting (due to being a regular customer perhaps) absence of proper documentation or simply the failure to register the debt documents in applicable cases. While on the other hand, the external causes are those that the creditor company and the person in-charge have no control over with. The most common instances of external causes are personal or business reverses or misfortunes such as not being paid by their own clients, cash flow problem that can lead to bankruptcy, fire, death of investor, or worse of the owner (that’s why insurance coverage is a must). 

To avoid repeating or committing these causes either internal or external, the creditor/ credit & collection in-charge should make it sure that the fundamental requirements of a credit approval matrix and collection escalation system are available and well implemented. Below are three (3) ways to surely improve your delinquencies in receivables.

First, there must be accurate records of amount to be collected. Basically, a good and even simple computer system can give you an updated and accurate of amount to be collected. For mechanized and manual environment, a double-checking is suggested. Any creditor that does not even have accurate records of amount to be collected is surely in big trouble. You don’t have to hire computer programmers to have good and efficient record keeping; what you better need is a streamlined operation. Too many papers only mess up things. If you can have all necessary data in one “sheet”, this is much better than multiple files. Fortunately for us, there are now ready-to-install programs that run practically on all platforms. All you have to do is to source the best and pick-up the most applicable to your company.

Second, timely reminder and follow-ups. Use reminder letters. Do something every 20 days. Use telephone or call them in their cellular phone for follow-ups. This will send a good signal to your client that you mean business.

And lastly, well defined procedure of handling delinquent account. Companies with effective credit and collection policies are surely the ones with well-defined procedure, especially in handling delinquent accounts. So it’s good to follow them.

For credit & collection questions and inquiries, call or text 0917-7220521 or email at [email protected]