Tips on Managing Marginal Accounts
By Michael C. Dennis, MBA, CBF

Almost every account portfolio includes customer accounts that can or should be classified as substandard or marginal credit risks. If properly and carefully managed, selling to these accounts can represent incremental sales and profits to the creditor company. To manage marginal accounts properly, the credit professional should:

• Network with other credit professionals to discuss common accounts including [or perhaps especially] marginal accounts. Networking includes the exchange factual information, as well sharing ideas on how to better manage risk and control payment delinquencies.

• Consider purchasing credit insurance on specific accounts, or on the entire account portfolio as one way of addressing the risk associated with selling on open account terms marginal accounts.

• Follow up promptly when this type of account becomes past due.

• Consider order holds earlier on marginal accounts.

• Establish a small or conservative credit limit for marginal accounts.

• Schedule periodic credit file updates on every marginal accounts to see if financial conditions and payment trends are improving or deteriorating.

• Inform the salesperson that the account is considered marginal, and notify the salesperson that the credit limit will not be exceeded without your approval.

• Make sure that the credit file, and the on-line notes reflect that fact that the account is considered marginal and should be monitored carefully.

It has been suggested that the true test of the credit department's effectiveness involves the department's ability to monitor, control and manage marginal accounts.

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