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Controlling Risk Early in the Customer Relationship
By Michael C. Dennis, MBA, CBF
Occasionally a new customer will test a creditor to determine their
sensitivity to late payments. It is important that this situation
be addressed correctly and quickly. If this is not done, chances are
that new customers will delay payment - and this may set the pattern
for the all of the customer's future interactions with the creditor
company's credit department. Delinquent new customers must:
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Be contacted as soon as possible after they become past due,
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Reminded of the terms of sale,
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Told that the past due balance must be paid in full immediately,
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Should be considered for a credit hold,
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Should have the credit limit re-evaluated and if necessary reduced,
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And the new customer should be told that future delays in payment
will result in the decision to extend credit be reevaluated
Remember that some customers deliberately and systematically test
the creditors to determine just how much it can get away with before
the creditor takes action such as placing the accounts on hold, or
for collection. It is important to demonstrate competency, resolve
and attention to detail early in the business relationship when addressing
past due balances, and if a new account's payment pattern does not
improve, the credit manager should decide quickly whether the customer's
open account terms should be reduced or revoked.
One final thought: If the credit department is unable to bring a
new customer's payment pattern back into line quickly chances are
that the creditor will not have a satisfactory relationship with
the customer and the account should be closed, or at the very least the
credit limit and terms should be reduced or shortened.
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