Download PDF version (47.7k). The full text of this article is available as a PDF document.

A good source of potential revenue hidden among accounts receivable is marginal accounts. When collecting these accounts, producers must be ready to take swift legal action at the first indication that the company may not get paid. The efforts of full-time credit managers will provide financial returns almost immediately. The best person for the job is someone who knows a company's customers and can establish good rapport over the telephone. Knowing how to work with marginal accounts is what distinguishes the star performers from the merely satisfactory.Of all accounts, 50% are very creditworthy (VCW), 20% are not creditworthy (NCW), and 30% are marginally creditworthy (MCW). Credit managers earn their keep by approving and monitoring MCW customers because this increases sales without interfering with cash-flow goals. Marginal accounts require special security tools that allow your company to approve a sale while minimizing risk:

  • Personal guaranties
  • Joint check agreements
  • Performance and payment bonds
  • Mechanic's liens
There are some long-term benefits of these approaches. First you're helping your sales staff by establishing a consistent set of credit rules. Second, you're keeping a customer that would be purchasing from your competitor. And third, you might be helping to create the new largest contractor in your area.

Keywords: account, cash flow, credit, marginal, guaranty, joint check, bond, lien