Factors to Consider Relating to Credit Holds

A credit hold can have such a devastating impact on a company’s relationship with its customer that it must be carefully considered and carefully documented.  In my opinion, the decision maker should know most if not all of this information:

• How long has the company been a customer?
• What is their typical annual purchasing volume?
• What is their typical payment pattern with us?
• Do they pay other trade creditors differently?
• Do we hold any form of security or collateral?
• How much is owed?
• How much is past due?
• How far past due?
• Has the customer made and broken any payment commitments and if so what reason(s) were given?
• Has the debtor made a payment commitment?
• Is it a firm commitment, or a forecast?
• Do you believe this commitment, or question whether they can and will make the payment? 
• If you question the customer’s ability to pay, why?
• What is the customer’s financial condition?
• Has their financial condition deteriorated recently? 
• If so, how?
• Does the customer have a history of slow payments?
• Do they have a history of breaking payment commitments?
• What is their credit limit?
• What is their A/R balance?
• How much is on credit hold?
• When was the last time the account was updated?
• Is this a “friend of the boss” account [Does the customer have any personal or professional ties to senior management?]
• Were we able to provide the customer and the salesperson with advanced notice of a potential credit hold?
• Under what conditions will the credit hold be withdrawn?
• Is the order pending customized or standard?
• Who requested the credit hold?
• Who approved the credit hold?
• Are we recommending production hold as well as credit hold?
• Have we notified the salesperson about a possible credit hold? 
• Was he or she able to provide additional information or insights?

© 2011.  Michael C. Dennis.  All Rights Reserved.