Credit Management:Basic Collection Approaches,Types of Defaulters,Delaying Tactics and Signals for Potential Defaulters

Basic Collection Approaches:
There are many ways to try to collect. Do you know them?
Collection approaches can be broadly classified into:

• Persuasion,e.g. “Pay now because it’s better for you…”
• Coercion,e.g. “We’ll have to take other forms of action……….”
• Education,e.g. “Your payment isn’t here. It is important to pay because….”
• Problem solving / Emphatic,e.g. “How can we help?”

Can you identify the types of Non-Paying Borrowers?
We can classify them as:

• The chronic forgetter,i.e. always forgets to pay;always needs to be reminded
• The accidental forgetter
• Changed situation,i.e. excuses
• The deliberate delayer

Next,what are their Delaying Tactics in Payments?

• Cheques submitted are short of one other signature
• Claims that equipment is not working as specified
• Claims that their copy of invoices have not been received
• Amount in figures and words on cheques differ
• Signatory is overseas or outstation
• Cheques not received by main contractor,hence,they as a sub-contractor have yet to receive it

Do you know what are the Signals Alerting that Debts Might Turn Bad?
Some of the danger signals include:

• A customer who cannot be contacted for quite some time,
• A change in customer habits,especially gambling,
• Market rumors and information which give negative reports about the customers,
• A customer who has been paying regularly is now having cashflow problems,
• A sudden large order. Prior to this,the customer trend of payment is very prompt and his credit line could be small,
• Heard rumors or news that the customer is required to charge his assets or asked to charge additional assets to the bank.

• Name Some Delaying Tactics That Delinquent Debtors Use
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