The most expensive type of mistake to make is one that you do not learn from. Why? If you do not learn from your mistakes, you are likely repeat them.
- Who made the credit decision?
- Was it properly documented?
- When was the last time the credit file was updated?
- What was the first indication that the debtor was in trouble, and what action was taken at that time?
- What steps were taken to collect the past due balance?
- When was management informed about the problem?
- More fundamentally: Was everything done that could be done to prevent the problem in the first place, and to minimize the impact on the creditor company once the problem became apparent?
I believe that an objective review is critical, and that any and all of the lessons learned be shared openly with the entire credit team. The intent is not to embarrass anyone. The goal is turn lemons into lemonade. To make the best of a bad situation and ideally to reduce the chances that the company will lose money as the result of a similar problem in the future.
Do you try to put past problems behind you as soon as possible, or do try to learn something from every bad debt write off?
Michael Dennis’ Covering Credit Commentary. Michael’s website is www.coveringcredit.com.
The opinions presented are those of the author. The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors. Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.