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The 3 Types of Commercial Debtors

There are 3 basic types of commercial debtors. The faster you recognize the type of debtors you are dealing with, the better the chances for commercial debt recovery. Knowing the kind of debtors your customer are can be helpful when you approach them. As a rule, delinquent debtors fall into 3 types of basic commercial debtors.

Commercial Debtors that are a victim of misfortune

The most common kind of commercial debtors are the ones who have been the victim of misfortune. Their bad luck could be an uninsured fire or a theft. It might be the temporary reduction of company income because of a disaster such as a flood. It could be poor business conditions in their community or industry.

Sometimes commercial debtors are a victim of the insolvency of one of their customers. Unusual weather can causes customers, especially those who sell seasonal items, to become delinquent in paying their suppliers. There are several strategies that can be employed with these types of commercial debtors.

Commercial Debtors with poor management skills

Some commercial debtors are victims of poor management - their own. When they incur a debt, they sincerely intend to pay on time, but they get in trouble by making poor judgments.

Sometimes poor judgment causes a businessperson to overbuy. Often this type of debtor complains, The salesman talked me into buying more then I meant to buy. This statement is truer than many commercial creditors like to acknowledge.

According to a survey of credit executives, many sales managers insist on granting credit to commercial customers who are poor risks. Even though they know that these customers cannot pay on time they just want to close a deal. Such situations are conflicting interests between the sales and credit departments on the terms for commercial debtors.

Dishonest Commercial Debtors

Fortunately, dishonest, or fraudulent commercial debtors are in the minority. Only small fractions of the people who use credit are dishonest. The dishonest commercial debtor never has any intention of paying. Right from the beginning, they are using a scheme to cheat creditors. These are the riskiest commercial debtors.

It is easy to spot these types of commercial debtors. From the start, they may order merchandise in excess of the normal needs of his type of business. Then early in your collection process, they become evasive and difficult to contact. When you do catch them, they make promises which they don’t keep. They refuse to offer any explanation for his failure to pay. Evasion is the standard tactic for these types of commercial debtors.

The point to keep in mind about these commercial debtors is MOVE FAST. As soon as you see a debtor is dishonest, take legal steps to collect the money he owes you. This is one type of customer you can afford to lose.

If you have any questions about commercial debtors an AAB professional would be happy to answer any questions you may have. You can also schedule a free consultation on commercial debtors.
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