Robbing Peter to Pay Paul… and I’m Not Paul – Michael Dennis, CBF

I'm Not Paul

A recent CMA Poll asked this question: “When do you consider placing an account with a third party for collection.” I was surprised that the customer action that was the second lowest reason for placing an account for collection was: “When the debtor is paying other creditors but is not paying my company.”

The fact that an account is past due is unlikely to be the catalyst for me placing the account for collection. If it were, I would simply create a rule stating that any account more than xxx days past due should be placed for collection. Also, I have developed a certain tolerance for the fact that customers make and then break commitments because it occurs so frequently, and I expect that some customers that dig themselves into a financial pit will stop communicating with me while they try to claw their way out.

To me, knowing the debtor is paying other creditors but is not paying us is far more important than if the customer has broken payment commitments. In my opinion, it is far more important than the account being past due. I think it is even more important that the fact that the debtor has stopped communicating with me.

Consider this question: How would you explain to your manager that you knew a seriously delinquent debtor was paying other creditors including your competitors, but not your company, and you decided to take no action? I cannot think of a reason, explanation or excuse to explain this inaction because money that could and should have been sent to us was used to pay other creditors, and in my opinion this is unacceptable.

Michael Dennis, CBF

What do you think? Opposing arguments are always welcomed.

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.

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