We are close to the end of another year. Did it go fast or was it our
imagination? During the last 12 months did we visit the doctor for an
annual check up? Visit the dentist to have teeth cleaned? Have the
automobile inspected? Chances are very good the answer to these
questions is yes. The majority of states have laws that require one of
these and the other two are known as preventative measures.
Did we have the credit and collection department reviewed during
the past year? If the answer is no, why not?
The account receivable is the second most valuable asset any
organization has and yet it is the most overlooked until after a
serious problem surfaces. A major corporation just announced that it
is increasing its bad debt reserves due to an increasing number of
customers unable to pay its bills. Two major companies in the same
industry have announced they are contemplating filing Chapter 11 due
to their inability to pay their suppliers and bank as required. Is it
possible these actions could have been avoided if credit and
collection policies had been reviewed earlier?
We all know what is said about hindsight.
It is generally believed that auditors review the account
receivable at year end. However, the majority of audit firms only
perform confirmation of the account receivable through random
selection of account balances and from that determine reserves. What
does that tell us about the effectiveness of our procedures; the
thoroughness of our due diligence; and the uniformity of our decision
Utilizing the services of a professional credit-consulting firm can
prove to be cost effective. The professional credit consultant can
recommend changes to improve efficiency; methods to communicate more
effectively with management, sales and the customer; identify
potential problems before they materialize and advise of methods to
Unlike auditors who converge upon the battlefield after the
skirmish and slay the wounded the credit consultant prepares the
combatants with a plan to be successful.
I wish you well.