For the past couple of weeks, I have been receiving emails on what to do with their delinquent accounts. So, I decided to come up with series of articles that will tackle this particular problem hoping it will also benefit those that are in the credit and collection profession. Needless to say, due to the so-called economic shifts in financial conditions, there are now a lot of collection problems and delinquencies that we are encountering. Some are internal causes, while most I presume are coming from external causes.
So, the simple question now is, how would you know when it is time to do some reinforcements or escalation in your delinquency problems. Some have written policies to this effect, so it is just a matter of enforcing them, while some who do not have a written policy just monitor danger signals. For you to be more efficient and effective in doing receivables or delinquency management, a competent Credit and Collection Manager must be able to identify these danger signals or in other industry they call it "storm warnings", in its earliest stage as possible. So, if you want to know when it is time to escalate? Below are "tip-offs" to possible danger signals:
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.
3. Defaults on payment commitments, violations of terms and conditions or written agreements.
4. Failure to avail of discounts and/or rebates.
5. Loans where more than a single source of repayment cannot be easily or realistically identified.
6. Substantial jumps in the size of single orders or contracts which would strain existing productive capacity.
7. Speculative inventory purchases out of line with normal purchasing practices or established maintenance levels of the company.
8. Inability to obtain merchandise stock on regular trade terms.
9. Customer's unrealistic low pricing of goods and services under the guise of break-even volume levels essentials to keep the business operating.
10. Loss of key product lines, franchise, distribution right/sources of supply.
11. Marked changes in the timing of seasonal loan requests.
12. Sharp jumps in the size of loan/ credit line request.
13. Loss of one or more major, financially sound customers.
14. Notice of insurance cancellation for failure to pay insurance premiums.
15. Commitments to projects/ ventures promising exceptionally high/unusual profit potential.
16. Neglect or discontinuance of profitable "bread and butter" lines.
17. Delay in reacting to declining markets or economic conditions.
18. Lack of visible management succession.
19. One-man operations showing growth patterns that strain the capacity of the owner to manage and control.
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. The early detection of these danger signals is your trigger that it is time to escalate.
For credit & collection (C&C) questions, comments and rejoinders you want to share or inquire, call or text 0917-7220521 or send emails to
elimtingco@yahoo.com