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Five Myths About Credit Management
By Paul Gregory

  1. Myth: An all-out collection effort will collect almost every delinquent accounts. Reality: The time to manage risk is before orders are released and preferably before the account is ever opened. Once an order is released, the power equation shifts and the customer is largely in the driver's seat.

  2. Myth: It is both good manners and appropriate to allow several days as a grace period before calling a customer to ask about the status of a past due balance. Reality: Grace periods are unnecessary. There is nothing rude or inappropriate about asking a customer for payment status on any past due balance

  3. Myth: Credit departments often upset the apple cart by asking privately held companies for financial statements. Reality: Request of this type are received routinely. The most common "reaction" to such a request is to ignore it.

  4. Myth: Salespeople have nothing to contribute to the debt collection process. Reality: Salespeople can sometimes bring additional pressure to bear to get a delinquent customer to open a dialogue with the credit department.

  5. Myth: Export sales are often more trouble than they are worth. Reality: Foreign sales can be lucrative opportunities for U.S. based companies trying to expand sales. However, export sales often present significantly higher risk than domestic sales, and it requires specialized skills and expertise to control this risk.

Reprinted with permission from the ©2002 Covering Credit Newsletter 9/4/02 Edition.
All Rights Reserved.

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