Credit guru Thea Dudley has spent more than 30 years in LBM credit management. Now she’s here to answer your credit and collection questions. Got a question for her mailbag? Contact Thea at theadudley@charter.net
Dear Thea,
I feel like I keep hearing the same stories over and over from my customers on why they can’t pay. The one that sticks out is divorce. It’s “I am getting a divorce but I will pay you after it is final,” or “My soon-to-be ex emptied all the bank accounts.” I Is there some universal theme when it comes to paying late or not at all?
Signed, Feeling Dumped in Denton
Dear Denton:
Why, yes there is. You’ve heard of the “Four Cs of Credit?” Critical thinking, communication, collaboration, and creativity. Well, let me introduce you to what a quick witted credit buddy of mine refers to as the “Seven D’s of Collections.”
1. Drugs/drink
2. Dice
3. Dames
4. Divorce
5. Disease
6. Disaster
7. Death
Any one of these can hurt a business, some more intensely than others. Combine a few and you have a cash-flow calamity of epic proportions. And they usually come as a combo platter. Drinking, dice, and dames are as classic and predictable as combo as your old-school dinner menu or salad, entree and dessert. Where you find one, you usually find the rest.
You can also switch it up, making it Drinking, dames, and divorce, or Drugs, disease, and disaster; Insert any of the Ds for the combo platter you never really wanted. The combinations are endless. So are the stories, from the contractor who married an exotic dancer who then became his bookkeeper and eventually bankrupted the company to the customer who “summered in Vegas” and left all our payments in Sin City.
Whenever I hear divorce mentioned, I automatically reserve 100% for bad debt reserve. It never works out well for anyone. Our money seems to become community property as the business gets dragged into the battle. And while it’s going on contractors scrambling to dig out seek our help with the shoveling. After all, they will boldly remind me, if we don’t help them, they will go to my competitors.
Disease and disaster are the hardest. it is heartbreaking to hear of when either of these usually non-self-inflicted items happen to a customer. Yes, credit people do have compassion. Depending on which of the seven Ds a customer is faced with, it can be a difficult situation for everyone. We, as stewards of the company’s money, have to figure out how and when to resolve the outstanding balance issue while the customer is dealing with life-altering issues.
It all goes back to communication. If the customer is talking to me, trying to work something out, I can work with anything. It is when there is no effort and no communication that a difficult situation becomes pretty one-dimensional, leaving a credit manager with only one option.
While communication is key, at some point the communication has to come with some cash, some avenue for how this outstanding debt is going to be paid. It is unrealistic to think any company can carry another for an extended period of time with no resolution in sight.
Everyone is human and gets into situations occasionally. It is how you choose to handle it that makes a difference and sets the tone for how the story is going to end. I prefer a happy ending, preferably with a glass of wine and a cleared check.
