Accounts Receivable Management: Ensuring Payment When Your Customer Has Cash Flow Problems

If your customer is experiencing cash flow problems it is very common for them to delay payment. If this is the case, you need to rectify the immediate situation as soon as possible so that you can get paid what is owed to you. Likewise, you need to make some changes to ensure that you are not at risk with the same customer going forward.

In the first half of this article, we outlined three strategies you can try if you have customers with cash flow problems including penalties/discounts, credit cards, and payment plans. Below are a few more tactics to help your accounts receivable management team to not only help your customer, but to improve your relationship with them and ensure you get paid the money owed to you too.

1. Negotiate
It’s better to get something than nothing at all even if you lose money on the sale. There will be times when you may consider offering a discount if the customer makes a partial payment and you agree to settle their account in full and simply part ways.

Many years ago when we were a much smaller company, we were doing a considerable amount of business with a customer. Over time, they started paying later and later. There were plenty of warning signs that their business was failing but we ignored it and kept providing services until their past due balance was too much to ignore. At that point in time we should have offered them a discount to make good on their account, but we waited too long and the company shut its doors.

The lesson here is simple. Set credit limits not to prevent customers from buying, but to reduce your risk, and use a system to notify you when good customers are slowly becoming a risk to your cash flow.

Anytime Collect accounts receivable management software includes reports, inquiries, and a lot of information to help you identify customers that are starting to struggle financially. You can quickly see how many times they’ve broken promises to pay, as well as their average days to pay by invoice amount.

2. Returns
Distributors and manufacturers are in a unique position as they invoice for products that may be returned if unused. If a customer is experiencing cash flow problems, you may authorize a product return for the unused or available quantity of product remaining on their shelves to avoid a complete loss. It may even be worthwhile to pay the return freight.

3. Bartering
In the (very) old days people would barter for products and services. This doesn’t happen so much today, but why not? If one of your customers is severely past due, and they simply can’t afford to pay you, why not consider bartering for something they offer that could have value for your organization? If your customer offers sales training – have them train your staff. If they sell office furniture – throw out some of your old furniture and upgrade with new products they offer. Be creative. Even if they have nothing that appears to be of value you can always ask them for referrals or to help you market your own products and services to their customers and suppliers. Who knows, you could end up with a large contract by simply opening yourself up to alternative opportunities to make good on bad debt.

accounts receivable management

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