Managing your accounts receivables can be difficult when your priorities for payment are different than those of your customers.

Basketball great Larry Bird once described his economic priorities in the lean years before he became rich and famous. He said that if a payment was due to the bank and his kids needed shoes, he would buy shoes first. He intended to pay the bank when he could, but shoes for his kids came first.

Your customers will also prioritize their accounts receivables for payment, especially in a slow season or tough economic period. If a long-term customer begins to pay you more slowly, you walk a fine line between needing the cash flow for your own business and wanting to reward their loyalty by allowing a little breathing room in a tough time. How do you tell the difference between a temporary cash crunch and a customer who is slowly going out of business?

If you have done your due diligence and have a good customer contract, then you likely have granted the customer credit terms you can live with. If their business becomes seasonal and the payments get further and further apart, you can restructure your plan to load larger payments when the customer has more means to pay, and lower payments in slow times.

There is another factor to consider as well – if a customer is not paying you, they are probably not paying other creditors. If you decide to wait, make sure you have a signed promissory note and if possible a personal guarantee, which means the owners will be personally responsible if the company goes out of business.

If a long-time customer who has always paid on time suddenly becomes more and more delinquent on their payments, get on the phone and speak with them.  Only you can decide what the limit of how long you will wait to be paid. The important thing is that you make an informed decision based on the information you can gather. Depending on what you learn, you might:

Agree to wait on payment until given date.

Suspend new orders until balance is paid.

Discount balance owed to get it paid off. New orders on cash on delivery basis.

Roll old balance into a new order at a discounted price. For example, if they pay outstanding balance, offer them 4 new months at the price of 3.

Terminate customer and refer to a collection agency.

If you are committed to a regular review of your accounts receivables  you will find those customers worth your time and investment and customers who are not going to be around for the long term.