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Accounts Receivable Data

What goes around comes around

It’s generally understood that a community is more powerful than one person. “We’re working together—that’s the secret,” Sam Walton often said. In the world of credit, this is also true; no single internal metric tells us everything we need to know.

Looking back at your past credit decisions—have you ever placed a “hold” on a customer or extended or granted a greater credit limit when you weren’t sure it was the best decision? What drove that decision? When you ask a credit professional this question, the most frequent response is—“My data supported the decision.”

This, of course, is a logical response, but was it the right call? Does your data alone tell you enough to make tough decisions? This article is not about strategy, but answer two very important questions: What action do you take when your customers are not meeting your terms? and What steps do you take to approve a new account or a greater limit?

Your accounts receivable (A/R) may be your company’s single most important asset and as a credit manager or financial officer, you’re there to protect it. We credit professionals may not make the sale, but our informed credit decisions and actions support company growth and bottom line results. The operative word here is “informed.”

As information technology has advanced and become more interconnected, accessing and sharing information has never been easier. Companies need not make decisions in a vacuum. Data suggests those who do business without proper risk management tools tend to be less profitable and cash poor. Without corrective measures, over time, under-informed credit decisions will prove costly.

When you have an uneasy feeling about an account, what should you do? A decisive credit professional will access and analyze the company’s A/R aging data and perhaps even crosscheck it with other known and trusted industry professionals. But for an informed decision, members can refer to Blue Book Services for a comprehensive overview of the account in question. Sometimes gut feelings turn out to be nothing, but as credit or finance managers, we have to do the homework and follow the old adage, “better safe than sorry.”

As technology has allowed produce buyers and sellers to share trade experiences for over a century with relative ease, today it’s become even simpler. Not possible you say? Well, yes, it is…and there are greater advantages.