Aggressive Collections Net Impressive Results
Less than two accounts per thousand ever become bad debts at Thermo-Industries, Inc. (Raleigh, North Carolina), and Credit Manager John Clark, CCE, and his three regional credit managers intend to keep it that way with an aggressive collections process that begins with the initial extension of credit.
"Often, when we initally extend credit to customer, we call to introduce ourselves, thank them for their business, and explain our credit and collections terms, policies, and procedures," says Sherri Williams, CCE, one of the three regional managers.
The company always sends a two-page letter to the customer detailing all its relevant policies: credit and collections policies, freight policies, and warranty policies. This preliminary communication helps make it clear to all customers that the company expects its money in a timely manner.
 We must be able to act quickly once we make a decision to file, so we want to have all the information already on hand. 
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-- Sherri Williams
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Sales Information
When a customer places an order for equipment (Thermo-Industries sells heating and air conditioning products), the credit department gets as much information as it can about the job on which the equipment is to be used, including
- the jobsite address
- the name of the general contractor for whom the subcontractor (Thermo-Industries' customer) is working
- the owner of the site/project
- whether the project is bonded
- whether there is to be a joint-check agreement between the general contractor, the subcontractor, and Thermo-Industries.
- what kind of security Thermo-Industries will have
"When we're extending credit, customers are very willing to give us all this information," explains Williams. "If they're having difficulty paying for whatever reason later on, though, it can be very difficult to get this information from them. That's why we always try to get as much information as we can ahead of time."
Taking a proactive stance on information gathering offers another benefit. In North Carolina, companies must file a lien within 120 days and provide bond notification within 90 days. Since the company may want to make the decision to pursue those options shortly before that time (in order to give customers time to pay after initial billing), time is of the essence. "We must be able to act quickly once we make a decision to file," she explains, "so we want to have all the information already on hand."
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Vigilance
The credit department follows all accounts vigilantly. "Each month, we go over all past dues," she says. The department often exercises its option to hold orders when an account is past due. It also suspends credit when an account is more than 15 days past terms until such time as all the past due is paid.
The department makes contact with customers immediately if and their accounts become past due. "We may contact the salesperson responsible for an account to see if he or she can shed any light on what the problem may be," she says. "However, our sales people do not get involved in the collection process."
The subsequent phone call then probes for additional details:
- If a customer is not paying because it is not being paid, Thermo-Industries may send a notice of claim of lien to the appropriate parties to encourage payment from the contractor or owner.
- If it looks as though a customer may be considering filing bankruptcy, Thermo-Industries will attempt to get a judgment as quickly as possible so that it can become a secured creditor.
Persistence
Finally, the department virtually never gives up on a delinquent account, persisting through several measured steps:
- First, delinquent accounts are aggressively pursued by regional credit managers.
- If this is unsuccessful and if it is a small account, the company will take the customer to small claims court.
- If it is a large account, the company will seek the assistance of an attorney or pursue other collection tactics such a lien or bond notices.
"We'll obtain judgment and then execute on the judgment," she continues. "And before we write anything off at all, we verify through the execution process that the debtor has no assets to levy upon."
Editor's Note: This article originally appeared in the Credit & Collection Manager's Letter.
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