Five years into a generally satisfactory relationship with one customer, the payments flow began to slow down for a credit manager we spoke with a while back, and soon he was owed more than $20,000.

He began calling to get them to work down their past-due balance, and at first they seemed cooperative. But soon cooperation ended, and, after about three months, it became harder to get the customer to accept or to return his calls. By this time, the past-due balance was reduced by only $3,000, and their business relationship became strained.

He learned at an industry credit group meeting that the customer was paying other creditors. In effect, their customer was using money it should have paid to him, to pay other suppliers. Obviously, something had to be done to address this inequality.

After careful consideration, a decision was made to issue a demand for payment in full.

It didn't work.

The customer did not flinch and continued to ignore their payment demands. About a month later, they placed the account for collection. After working with the debtor for another month, the collection agency told him that no progress had been made toward clearing the past-due balance.

In thinking back on the experience, he developed a list of what he believes are the most common mistakes creditors make when considering whether or not to place accounts for collection include:

• Not working an account hard enough before referring it to a third party for collection, and/or choosing the wrong agency.

• An unwillingness to compromise when a compromise is necessary to close the deal and collect the majority of the balance due.

• Not visiting the customer personally before referring the account for collection, or at the very least having the salesperson meet face-to-face to find out how soon you can be paid,

• Waiting too long hoping the account will pay the debt.

• Ignoring small-dollar payment problems until they become so old they are for all intents and purposes uncollectable.

• Not addressing disputes in a timely manner, which gives the customer an excuse not to pay.

• Not responding appropriately when a customer breaks one or more payment commitments.

• When a decision to place an account for collection is made, not providing the agency with all of the required supporting documentation.

• Threatening to place the account for collection, but not doing so, leading to a situation in which the customer may consider all such threats from the creditor to be bluffs.

• Interfering with the collection agency's efforts by negotiating with the debtor.