It isn’t often I am left speechless. 18 years in debt collection will do that to you. But when I am, it is normally for something outrageous and what I have just seen is one of those times- an accountant friend of mine asked me for some advice to help one of their clients who are owed a substantial amount of money from one particular customer- all new customers are expected to complete a credit application and this one did, which is great- so far so good. It was only when I compared the credit limit to the amount that they owed did my mouth fall open in shock- credit limit: $3000. They owe: $233,400.00. No, you aren’t seeing things- they owe almost a quarter of a million dollars. How on earth is someone with a $3000 credit limit allowed to rack up such an enormous debt? It completely beggars belief doesn’t it? There has clearly been a major breakdown in communication between accounts and operations at this company, and you could probably overlook going a couple of grand over, but two hundred thousand? Heads surely need to roll and when one thinks of the term “unconscionable lending” this sort of thing springs to mind. Needless to say, I told my friend I don’t like their chances of recovering that money, even with a directors guarantee. I suppose the moral of this story is- credit limits should be exactly that- a limit. The moment your customer goes over or starts ordering beyond the limit should be the moment you say no more. Be firm about this and make no exceptions- if they cannot abide by your terms, let them go elsewhere and be one of your competitors problems. Cheers
Credit limit? What credit limit?