Spotting the bad credit risk - ask before, during, and after the sale.
Before the Sale
* P.O. Box given. No physical address.
* Number of employees in the company.
* Date the company was founded.
* Registration with the Department of Corporations.
* Will not give any personal information such as Social Security or personal address of the individual or officers.
* Will not give any trade or bank references.
* Type of industry.
* Very secretive.
* Dresses poorly.
* Type of building the business is run in.
* Types of vehicle the owner or officers drive.
* Shape of the business office when visiting the customer.
* Customer will not tell you who is liable for the bill.
* "In Care Of" is listed as permanent address.
* Customer will not give out financial information.
* Organizational structure.
* New bank account.
* Offering you post-dated checks.
* Will not sign a personal guaranty, UCC, or security agreement.
* Business is closed during regular business hours.
* Upset when asking for credit information when setting up a credit account.
* Filed bankruptcy in the past.
* Has collection problems on their personal or business credit report.
* No one at place of business knows or wants to talk to you.
* Customer has had numerous disputes with trade references.
* Geographic area of business.
During the Sale
* Layoffs at company.
* Checks do not clear bank.
* Trade and bank references put company on hold.
* Company uses more temporary help to finance payroll.
* Customer slows down on paying accounts payable.
* Customer doesn't return collection calls.
* Numerous promises of payment are not materializing regularly.
* Telephone numbers am being disconnected.
* Receive return mail from customer's business address.
* When calls are made on customer's place of business, no one is in.
* Checking accounts are closed.
* Company is being dissolved.
* Customer disputes pricing more than he or she has in the past.
* Customer continuously requests copies of all open invoices.
* Customer refuses to pay due to performance or quality.
* Customer continuously tells you no one is around to sign check.
* Customer tells you that they pay all creditors in 90 days.
* References start calling to find out current status of customer.
* Inaccurate or constantly adjusted financial statements.
* Unit sales volume decline.
* Administrative expenses growing at a percentage higher than revenues.
* Company reports a negative cash flow from operations.
* Customer's A/R balance in over 90 days is increasing.
* Conversion of A/R, notes payable.
* Tax liens being filed against customer.
* Has numerous overdrafts.
After the Sale
* Bankruptcy is currently in process.
* Receiving return mail.
* Dissolution of company is occurring.
* Partnership is dissolving and partners are currently suing each other.
* References are calling daily.
* Building is locked up.
* Building is empty.
* Telephone numbers have been disconnected.
* New owners.
* Customer business has moved out of geographic location.
* Customer has had bank credit line closed.
* UCC filings have been perfected.
* Judgments have been recorded against the company.
* Garnishments have taken place against the company.
* Repossessions have occurred recently.
* Mechanic liens have been filed against the company projects.
* The company's business license has been suspended.
* Tax liens have been placed on the company.
* Company is delinquent with current references.
* IRS has shut down the company.
* Bank has reduced the line of credit to the company.
* Unsuccessful personal contacts.
* No phone response.
* Financial statements show a negative net worth.
* Sales are dropping quickly.
* Over 90-day old accounts amount to 50 percent of A/R balance.
In today's competitive business environment, a credit and collection person must have the following characteristics in order to track down the skip customers and collect the outstanding credit owing:
* Desire to find the customer.
* Natural inquisitiveness.
* Ability to lead others to communicate.
* Tact and courtesy.
* Initiative and imagination.
* Patience and self-control.
* Skill in interviewing.
* Politeness and warmth.
Ken Zanolini is the corporate credit manager for SOS Staffing Services, Salt Lake City.
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|Date:||Jun 1, 1995|
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