Credit Management 101

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What are the fundamentals of superior credit management? A veteran credit woman of our acquaintance lists these:

Consistency. "Timely and accurate billing is the most obvious method," she says. "Consistent collection techniques can be documented. Make a schedule of monthly statements and phone calls. If your procedures are repetitive and predictable, your customers should not only be able to comprehend what you send them but should also have an idea about when it will be sent."

Promptness. Early on, make status calls to verify that invoices were received. She calls these "humble calls," because you don't want to be aggressive at this point, "but it is far better to find out if an invoice is not received or is in dispute at 30 days than at 60 days."

Persistence. Set up tickler files, track phone calls, and keep notes for your follow-ups. If you say you'll follow up in 10 days, do so. "If you don't indicate that what you're seeking is important, no one else will take it seriously," she points out.

Knowledge. Don't leave any room for doubt. State terms, finance charges, discounts, and refusals of disclaimers on all the documents--invoices, statements, order acknowledgments, rate cards, and credit applications. Reinforce the terms on every collection call. "I'm a firm believer in information overload," she says. "The best way to condition customers is to expose them to the important information that directly affects their paying habits. This repeated exposure of information can also help your case if you should have to litigate."

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Inquisitiveness. When you ask questions, show your concern about the situation. Make it clear that this is a problem for you, that you're not treating the delinquency as an everyday occurrence. Try to find solutions, she suggests, by asking the following questions:

What's holding up payment? Is there a problem?
Should I be concerned about your cash flow?
How much can you send immediately? How much in two weeks?

These questions can give you a good indication as to how serious the cash-flow problem may be, based on outstanding debt. At the same time, your company's sales force can give you information. "Ask them for information, especially on new accounts," she advises. "You'll be surprised how much salespeople know about the companies they sell."

Flexibility. "Be a chameleon," she says. "Use different approaches and personas. The approach with your Fortune 500 accounts would be different from your approach with smaller or onetime accounts. How we approach a customer is contingent on what awaits us on the other end of the phone, and the amount of experience we have with the account, as well as the dollar exposure."

Editor's Note: The above article originally appeared in the Credit & Collection Manager's Letter, a newsletter purchased by Credit Today in 2006. This article originally appeared prior to 2000.