Credit Matters Blog

Your customer list, a gold mine of new sales or a nightmare of future problems?

Kim Radok 23 November 2019

Salespeople are often encouraged to review their customer lists as a potential source of new business. A friend of mine suggests a “Lost Customer Program” may be a worthwhile exercise to reintroduce the business to its former customers.

The problem with reviewing old customer lists, with this type of program, is that it may equally lead to a whole range of new problems including slow payers, bad debts and fraud. Many customers may not have just drifted away due a lack of interest from your business. A number of them will have had their accounts closed for a valid reason such as a lack of commercial viability, slow payments, or because of bad debts.

On the positive side, contacting your previous customers opens a whole range of possibilities. These former customers may have new managers and employees which have not realised that your business was a former supplier. Your business may have new products or sales packages which were not available previously. Perhaps you can even sell on cash upfront for a discount.

On the negative side, new or desperate salespeople trying to keep their jobs may be tempted to sell to customers which had their accounts closed due to slow payments, bad debts, or fraud. Alternatively, there may be new owners for these businesses which you were not aware of, which means there will be no signed trading agreement.

If the above circumstances exist, purchase and sales fraud are distinct possibilities, as well as further payment issues and bad debts, if these accounts are opened.

My friend suggests a “Lost Customer Program” conducted periodically to ascertain the possibility of increasing sales makes good sense. This is an excellent strategy if conducted properly.

The proviso is of course, that proper due diligence needs to be conducted prior to trying to re-establish any relationship. Both sales and credit management should work together if such a program is to be conducted successfully. After all, it is no good reopening the account just to gain more problems and bad debts.