When a customer asks for a payment moratorium
or extended payment plan
By Michael C. Dennis MBA, CBF, LCM

If a customer asks for a payment moratorium or extended payment plan, before making any decision...

• Request financial statements to help gauge the severity of the customer's financial problem.

• Ask if the debtor has made the same request to all its creditors, or just to selected creditors.

• Request a list of creditors that have already agreed to the proposal.

• Determine whether every vendor is being asked for the same concessions or whether some vendors are being treated preferentially - and if so why.

• Discourage payment delinquencies by charging late payment penalties and by enforcing them.

• Encourage prompt payment by making certain that unearned cash discounts are charged back.

• If your company's pricing strategy makes your company a low price supplier, explain this to the customer as part of your collection efforts.

• If an account is on credit hold, make certain there is no way orders can bypass the credit hold, and if anyone "forces" an order out without credit approval, the credit manager should urge that the person responsible be disciplined or fired.

• When speaking to customers, address the current problem as well as any underlying problem.

• If the customer requests a copy of an invoice or a copy of the proof of delivery, try to send both. Why? Because doing stops the customer from asking for the other document later and using the fact that they don't have both as an excuse to delay payments even further.

• Reconcile payment problems as they occur. Don't allow them to pile up. The bigger the pile, the more difficult and time-consuming account reconciliation becomes.

• Remember that your company usually wants to continue to do business - even with slow paying accounts, so do what you can to retain customer goodwill while addressing and resolving payment delinquencies.

This article is an excerpt from a recent speech to the Orange County Credit Professionals Association.