I attended a recent seminar in which you stated that companies
should not sell to customers with a deficit net worth. Can you expand
on that statement?
Answer: I hope I have
been misquoted. The advice I usually give is as follows: A deficit net
worth indicates serious financial stress. The credit manager cannot recommend
a credit limit to a customer with a deficit net worth because that company
is technically insolvent. I believe that credit professionals need to
establish credit limits and credit terms for customers with deficit net
worth cooperatively with senior management. I think that there are many
instances in which it makes sense for a company to sell to a customer
when liabilities exceed assets, but I feel that this should be a "business
decision" rather than a credit decision. |