By Scott Blakeley, Esq.
Credit professionals face delinquent accounts on a regular basis. But before a company begins to take action in order to remedy the delinquent account, it’s important to know when to consider an account delinquent.
Technically, a delinquent account is one that fails to pay by the agreed-on date. However, these terms may be flexible depending on the type of customer and the type of vendor you are.
Should a customer pay beyond terms, it’s important to remember that they have still paid. Look to their payment history to determine if their lateness is business-as-usual or if it’s some sign of a major malfunction. If so, then it might be time to call it a delinquent account and work to get your money. It’s also important to consider your own business; if an account represents an important amount of business for a credit extending company, it might make sense to relax the standards a bit.
While there isn’t an industry rule on what constitutes a delinquent account, there are vendor-by-vendor guidelines on what should be considered delinquent. In certain industries, it might be acceptable to delay payment for certain reasons that wouldn’t be acceptable in other industries. Credit professionals should be well aware of these things before pursuing a delinquent buyer.
Once you’ve established that you have a delinquent account on your hands, it’s important to take action. If a company fails to do so, it could face serious losses. For some companies, accounts receivable may be their most valuable asset. If they’re not able to collect, then their revenues may be off and any consequences could be dire.
In addition to the obvious financial pitfalls, a company who fails to address its delinquent accounts could wind up raising an eyebrow or two at governmental agencies. A publicly traded company that fails to collect a large sum of money will have to change its reported numbers. It could require them to give notice that they may not be making their earnings targets.
There are a number of ways to collect on a delinquent accounts, one of which is filing suit and using litigation to your advantage. CMA offers many educational webinars on the topic, and much of the conversation at CMA-sponsored Industry Credit Group meetings focus on this topic.