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Common Mistakes Made in the Credit Department
By Dorothy Siegel

Business Credit Concepts
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Believing that customers are fundamentally honest. Credit professionals need to develop what is sometimes called professional skepticism.

  • Believing that diligent collection efforts will collect any outstanding balance...this can be likened to locking to barn doors after the horses have run off.

  • Accepting a payment commitment without getting specific information.

  • Assuming a customer's payment plan is "take it or leave it" rather than an opportunity to negotiate.

  • A genuine reluctance to place accounts for collection in spite of the well documented fact that the longer a creditor holds a delinquent account the smaller the recovery they can expect.

  • Ignoring warnings that a customer is in serious financial trouble such a broken commitments, bounced checks, and high employee turnover.

  • Failing to recognize there is risk associated with every credit decision.

  • Failing to inform a customer when an order is on credit hold.

  • Solving the immediate problem but failing to address the bigger problem....[a.k.a. The 400-pound Gorilla syndrome].

  • Relying on dunning notices [a passive collection tool] rather than more direct collection techniques [such as calls and visits to delinquent accounts].

Finally, failing to recognize that your company is in competition with every other creditor for the customer's time, attention and money. Your collection staff should try to find a way to make it easier for the customer to pay your past due balance than it is for them to ignore your collection efforts.

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