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Do you want to implement a new collections strategy, reduce your credit losses without sacrificing revenue, and operate an efficient and effective credit and collections department?

Editor’s Note

I am Katie Keich, the Vice President of Commercial Services for the iA Institute. Twice each month, I share substantive advice for the business to business credit & collections community. 

If you want to learn more, visit www.insideARM.com/commercial and join us at our next Commercial Credit & Collections Strategy workshop. I will personally teach you how to implement and execute a credit policy that can reduce your credit losses by 1% or more. These proven methods have already saved companies millions -- without inhibiting sales growth. 

Thanks for reading.

 

Are you maximizing the value of your credit monitoring tool?

Many organizations review prospective or existing customer's credit once. They should be periodically reviewed throughout the life of the account.

Credit Monitoring Solutions

Dun and Bradstreet, BillTrust, Creditsafe USA, Cortera, and Experian: all of these organizations provide credit monitoring solutions for your business needs. Far too often we make investments into these tools but are missing on the opportunities to maximize the returns. After attending our strategy workshop, you will learn how to develop a credit policy that's malleable based on your organization's tolerance of risk. The credit monitoring tool plays an important part in that policy and your processes.

Recommendations:

Prospecting. All sales opportunities aren’t good opportunities. Before the salesperson starts knocking on their door, develop standards for who should continue being a lead for your business. This will ensure your salesperson doesn’t waste their time and energy on a customer that isn’t going to pay you on time or pay you period. Remember that compounding revenue is the ultimate goal. A customer being turned off for slow-paying or not paying at all doesn’t compound.

Onboarding. In the onboarding process, in tandem with that conversation, you should be reviewing their credit history. What are you seeing for their average days beyond terms (DBT)? How many experiences are being reported? What is the recommended credit limit? Does the recommended credit limit support the average weekly volume being projected? Doing these check offs prior to activating their account, can save you money, time, and bad debt long term.

Recommended exercise, look at your customers in the last 90-180 days that have never paid you since activating their account. How much bad debt could have been saved if you had checked their credit at onboarding? Would all of them have made the cut?

Late Payment. Your customer isn’t paying within the agreed payment terms. Or maybe they were paying on time but lately, they have been pushing farther and farther out. As you will recall, we want to ask them what’s changed? However, you should also be doing a credit review to see if there is a pattern for other vendors. Many of the credit monitoring companies mentioned above offer the ability to have an alert sent. You can set parameters on your login for changes in credit behavior. This is why I always preach that a customer going out of business shouldn’t be a shock. If you are properly monitoring them you can quickly spot the warning signs before it’s too late.

Broken Promises or They Stopped Communicating. If the customer makes broken promises or they stop communicating with you, suspend their services. You need to get their attention and always need to hold them accountable for their promises. A customer that continues to say tomorrow or next week, or has excuses why they can’t keep their promise to pay. Should have their credit reviewed to see are other vendors experiencing the same issue? Have there been any judgments or recent reportings of?

Recommended exercise, look at the customers that haven’t paid you in the last 60 days. How much bad debt could be saved if you suspend their services today? If a customer hasn’t made a payment to you in 60 days, all services should be suspended and they should be in the final demand stage.

If the customer still isn’t communicating and/or paying after the final demand was sent, they should be sent to third party collections. So many customers miss out on collecting because they waited too long to send an account. Make your goal to be first in line not last.

Twice a year. Financial hardships happen for businesses every day. For instance, maybe your customers largest customer filed bankruptcy. Maybe a customer sued them and they had unexpected legal expenses. Maybe they were impacted by a natural disaster and the list goes on and on. By actively monitoring your customers, you can be alert to changes in their financial state. You should be minimally pulling fresh credit reports for your entire book of business twice a year. 

Are you doing these steps today? Are you seeing the warning signs and making quicker decisions? If you are using the steps outlined above, you shouldn’t be surprised when a customer goes out of business. In using the credit monitoring tools you should be able to quickly pull the trigger so that your third party agency can recover the funds for you. These credit monitoring tools have so many other bells and whistles to help you stay in the know. Take the time to learn all of them, so you can maximize the value these resources can bring to your bottom line. 

I hope you see purposeful decision-making throughout the steps mentioned above. If not, feel free to reach out to me via email at keich@theiainstitute.com. I would love to hear your thoughts. Even better, #chimein on my personal LinkedIn page where this article will be shared and published for open comments.

I look forward to seeing you at our upcoming strategy workshop this December in Scottsdale, Arizona, and helping your organization maximize revenue without increasing your bad debt!

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