Hi Everyone!
Hope all of you have been trying to stay cool in all the heat! It certainly has been hot, which can make collecting past due accounts more challenging.
I heard from one agency collector about a long-term client who recently passed them a claim for about $7,500 from the end September 2022. Over the past nine months or so, the client had been attempting to collect from their customer (debtor) by first letting their in-house credit manager communicate with the debtor’s A/P person. Unfortunately, since there was no movement to get paid, the client’s sales manager took over and was able to speak with the debtor’s president, who reassured them that the invoice would be taken care in a very short amount of time.
Although all indications pointed to payment being made, the client was very surprised when visiting the debtor’s website to see an announcement in which the debtor was going to be auctioning off all their machinery, equipment and inventory in mid-July.
The client was, to say the least, quite disappointed, particularly since their product may have been included in the inventory sell off. They had been doing business with this debtor for many years and by not mentioning anything about the upcoming auction, it left the client (the sales manager in particular) feeling deceived.
The sales manager went into overdrive to try and contact the debtor’s president and anyone else at the company. Although the main telephone number worked, all the extensions circled back to the main number where the message repeatedly said, “If you know your party’s extension, please dial it now.” How frustrating that must have been.
Working with the credit manager, the sales manager learned that there were already several UCCs filed against the debtor in which the proceeds from the sale of the equipment would obviously go to those creditors who have that priority. But what was even more astonishing is that there is a significant judgment against them for a default on a bank loan, as well as six outstanding property tax bills dating back three years. No wonder the debtor was not able to pay the client’s $7,500 invoice, which was relatively small in comparison to amounts sold in the past.
My first question to the collector was, “Why didn’t the long-term client place the claim significantly sooner?” The reply was that the nature of the relationship stifled their ability to be more aggressive. On one hand the client continued to trust the debtor which led them to keep moving the collection action goal post. On the other hand, their continued belief in the false payment promises went against their own credit policy of placing accounts for collection at the 90-day point when it’s early enough to still have some collection life to it.
Hopefully, next time, regardless of the nature of the relationship, the client will continue to reasonably stick with their credit policy and place their claims for third party collection support before extensions lead back to the main number and the business is being auctioned off.
Hector the Collector is a credit, collection, and human resources advice column by Nancy Seiverd President CMI Credit Mediators Inc. Your thoughts and comments (nseiverd@cmiweb.com) are most welcome!
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