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

Almost every creditor has accounts that should be classified as substandard or marginal credit risks. If carefully managed, selling to these accounts can represent incremental sales and profits for the seller. To manage marginal accounts properly, the credit professional needs to:

• 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 these marginal accounts become past due.

• Hold orders more quickly once a marginal account becomes past due.

• Establish a conservative credit limit for marginal accounts.

• Schedule periodic updates on each marginal account to see if financial conditions and payment trends are improving or deteriorating.

• Inform the salesperson which of their accounts are considered marginal, and notify the salesperson that the credit limit established cannot be exceeded without your approval.

• Make sure that the credit file, and the on-line notes reflect that fact that the account is 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