As a commercial collection agency, many of the accounts our clients place with us have been long term customers. When the business relationship was established with these customers our clients evaluated the credit worthiness of the entity. However, as time went on our client continued to extend or sometimes even increased credit terms solely on the basis the customer was paying or maybe even “just” promising to pay. It is often not until the customer’s account has fallen severely delinquent the credit terms are cut off. At this point the customer is no longer a source of revenue but an expense for our client and worse they never saw it coming.

With the beginning of a new year and the goal to improve your bad debt write off number for 2018, now is the time to find out whom you are extending credit terms to and if the terms make sense for you and the customer. Our collectors often find themselves explaining to debtors, our clients had no intention of becoming a financial investor in the debtor’s business by extending credit terms. The client was simply making it easier for the customer to do business with them, to grow their customer base and revenues.

Start this month by reviewing the financial information you have on file for your customers. If the information is more than one year old, it is time to request current data. Some of our clients use services such as D&B but these companies are really about reducing the evaluation to a single risk number. By requesting current information from your customers, you have the ability to determine if the financial information makes sense for the specific credit terms you have established along with gaining information about other vendors and banking institutions. Some clients express concern regarding alienating the customer by making the request but we find when it is done as a routine process most businesses accept it without question. One of our larger clients requires us to submit quarterly and annual financial statements. We would never object because we want them to feel comfortable they are doing business with a sound company.

The current financial information will also help you to identify customers who are worthy of an increase in their credit terms and allow you to provide the customer with additional products.

Contact JSD for help with financial evaluation requests today @ 800-305-0773 or info@jsdinc.net.

Deb Hedrick
Executive Director of Operations