Periodic evaluation of your accounts’ payment behavior may help mitigate your financial risk. One good way to review your portfolio is to compare how your accounts are paying you vs. how they pay others. First, take a look at the average number of days your accounts pay you beyond agreed upon terms . Then, compare that with how promptly they pay other creditors. (This data can be obtained from vendors like Experian.) You may also want to review their financial statements to determine income and cash flow availability. Next, see if you can answer these two questions:
1) Are there accounts that are paying other creditors more promptly than they are paying you? If so, this may be because these accounts are not getting the attention or the sense of urgency from you. It’s possible that they are paying the more persistent creditors first.
2) Does your account need to get paid first before they can pay you? Have they overextended themselves? If this is the case, you may want to consider evaluating the amount of credit you are extending.
Once you’ve been able to determine which accounts have unfavorable payment behavior with you, but are positively paying others, you can then look for these trends in the future and create a segmented list within your portfolio to review these accounts in more detail and on a regular basis.
Look for future posts from me, and let me know if there are any specific topics about managing your portfolio that you’d like to see.