I recently fund myself in a somewhat difficult position with one of my customers, and I am not sure what to do next. I want to ask more experienced members how they would handle this kind of problem. I have been providing flatbed services to this entity of over 2 years and everything has been fine until, more or less 6 months ago, they stopped paying my invoices regularly. My customer has never been a fast payer, but things have slow down dramatically form that point on. Currently, I have to call them on weekly basis to see which invoices that are already late 2-3 months are going to be paid. I don’t want to loose this customer but at the same time I am tired of being their bank. I am also afraid they may be already in some kind of financial squeeze themselves and that is why their payables fall behind. What if I am right on this assumption? If I allow this debt to grow I might never get paid when they become insolvent. Also, what would you do if they stopped paying completely after you gave them some hard deadlines for payments, but you are still in possession of their freight? Would you use it as a collateral? They just might say not to send any more trucks in, and I end up with big unsecured debt that will have to be pried from their hands through a legal system – we all know how that works. Thanks in advance for you help.
Unpaid invoices are piling up
- Thread starter WALTERK
- Start date
30
WALTERK,
Everyone gets into this kind of situation at some point. We have definitely been there before. And yes...it is a delicate matter - that if not handled properly - can leave you behind the 8 ball and unable to collect. And this is the trap you fall into - with a regular customer you have been "allowing" to pay slow - now they have got even slower. You give a customer net 30 terms - they start to taking 60 - that becomes the new "norm" and then it stretches to 90+ days. Now you are chasing...
I would stay on them for payment but also ask for post dated cheques to have on hand. So you are not cashing small amounts - then calling and chasing 1-2 weeks later for more monies. Ask to pickup the cheques (if possible) - and add post dated ones. You'll also be able to see what is going on at the place. If they comply - THEN you can slow down a little on their load requirements. This in turn gets the account down WITHOUT you having to cut them off. You aren't looking like the bad guy here - you simply "cannot accommodate" their needs. Take an order - then skip over a few. If the receivable is high - your main priority is getting back within terms - you'll never "catch up" if you keep doing more business with them. The customer will constantly be in catch up mode. And this never works out in the end - especially if they close their doors.
If you know who their customer is - do a credit report on them. If they paid slow to begin with - and now are even slower - chances are something effected their cash flow. Which in the end...has nothing to do with the services YOU have provided. The simple excuse of "my customer isn't paying me...so I can't pay you..." doesn't wash. Any reputable company should have a proper cash flow and make their own allowances for delinquents and slow payers.
You are not their bank - and have your own bills to pay. In the end - you being able to operate and maintain your own cash flow - is more important than keeping a customer who doesn't pay. With the time you've likely spent on trying to collect and make payment arrangements - you could have found a replacement customer...for this one....
Good Luck & keep us posted. If I can help - send me a PM.
Everyone gets into this kind of situation at some point. We have definitely been there before. And yes...it is a delicate matter - that if not handled properly - can leave you behind the 8 ball and unable to collect. And this is the trap you fall into - with a regular customer you have been "allowing" to pay slow - now they have got even slower. You give a customer net 30 terms - they start to taking 60 - that becomes the new "norm" and then it stretches to 90+ days. Now you are chasing...
I would stay on them for payment but also ask for post dated cheques to have on hand. So you are not cashing small amounts - then calling and chasing 1-2 weeks later for more monies. Ask to pickup the cheques (if possible) - and add post dated ones. You'll also be able to see what is going on at the place. If they comply - THEN you can slow down a little on their load requirements. This in turn gets the account down WITHOUT you having to cut them off. You aren't looking like the bad guy here - you simply "cannot accommodate" their needs. Take an order - then skip over a few. If the receivable is high - your main priority is getting back within terms - you'll never "catch up" if you keep doing more business with them. The customer will constantly be in catch up mode. And this never works out in the end - especially if they close their doors.
If you know who their customer is - do a credit report on them. If they paid slow to begin with - and now are even slower - chances are something effected their cash flow. Which in the end...has nothing to do with the services YOU have provided. The simple excuse of "my customer isn't paying me...so I can't pay you..." doesn't wash. Any reputable company should have a proper cash flow and make their own allowances for delinquents and slow payers.
You are not their bank - and have your own bills to pay. In the end - you being able to operate and maintain your own cash flow - is more important than keeping a customer who doesn't pay. With the time you've likely spent on trying to collect and make payment arrangements - you could have found a replacement customer...for this one....
Good Luck & keep us posted. If I can help - send me a PM.
30
I would look at it in a number of ways.
#1 -- If it's a broker, you need to be firm on your position because when a company has no hard assets, they can become a 'flight risk'
#2 -- If it's a direct shipper/receiver, you have to judge by what it is they are shipping. There are certain industries that notoriously pay slower than others. If you're noticing that your payments are getting slower and you are gaining more lanes ... particularly if it's a mature business, you need to be concerned. I think you have to decide what you can afford to risk on this customer and keep their outstanding debt to you below a certain level, even if it means curtailing the amount of business you do with them.
I had the same situation about 4 years ago with a customer, and they ended up telling me when it was too late that they were trying to refinance. Long story short ... they couldn't, and we ate $190K.
#1 -- If it's a broker, you need to be firm on your position because when a company has no hard assets, they can become a 'flight risk'
#2 -- If it's a direct shipper/receiver, you have to judge by what it is they are shipping. There are certain industries that notoriously pay slower than others. If you're noticing that your payments are getting slower and you are gaining more lanes ... particularly if it's a mature business, you need to be concerned. I think you have to decide what you can afford to risk on this customer and keep their outstanding debt to you below a certain level, even if it means curtailing the amount of business you do with them.
I had the same situation about 4 years ago with a customer, and they ended up telling me when it was too late that they were trying to refinance. Long story short ... they couldn't, and we ate $190K.
R
ranger_dispatch
Guest
Hi WalterK....I would suggest having a face to face meeting to express your concerns on their current payment trends and how their terms have or will effect your operation today. I would imagine with a 2 year relationship this company would respect your position and mutually come to an agreement. Be very specific and have a chart in place showing your payment needs so that you can continue to provide the service they require. Good Luck