When dealers are taking a look at how they should collect from clients, they should assess two factors: he true risk of not getting paid and also understand the relative profitability (or lack thereof, sometimes) of the customer. These two factors will show you that not every client deserves the love that they get. In an article for ProSales, Scott Simpson explains the importance of pulling credit three times a year and looking at relevant trends.
After assessing the trends, create a 2x2 risk vs. profitability map where you can place your customers into the following four categories: escape, protect against, address, and love.
Here is how to handle the escape group:
Escape. Customers in the lower left quadrant quickly become customers you want to escape from, as they are at risk of never paying you back. e.g. negative profitability. Corrective actions you can take include moving them to COD status, assessing fees (especially for difficult deliveries), preparing and filing liens, and considering a collections agency if they are delinquent. With these actions, you are OK if they continue to buy from you, but they’ll no longer be doing so on your in-house account (read: on your money).