Tightening credit policies as receivable time slows down.
The last six years witnessed a general decline in "days sales outstanding" -- the ratio measuring how quickly receivables are paid. But apparently those were the good old days. Robert F. Thompson, president of the Credit Research Foundation, expects to see an uptick in the DSO for the first quarter of 1991 and perhaps beyond. "We're seeing a slower turn of receivables in general," he says. "It's the beginning of a change." And perhaps the time to tighten credit policies, he adds.
It's never too late to send letters to existing as well as new customers telling them you've revised your procedures," agrees Robert A. Weissman, a Los Angeles lawyer specializing in collections and creditors' rights. "Then require them to sign a formal credit application that includes notices about payment terms, late fees, attorneys' charges, and other expenses you'll expect them to bear if bills become overdue."