I just heard on the news that a landlord in New Jersey waived rent for his tenants for three months. What a generous and compassionate gesture! This particular landlord has the means to take the hit, and he is also getting some assistance during the Covic-19 crisis. Small businesses, even with government assistance, may not have the means to waive payments, and may have only a limited ability to delay them.
How long can you afford to delay customer payments?
While you are working through this crisis, I hope you are monitoring your accounts receivable and reaching out to customers who are behind. Not all customers have no ability to pay you. Some may ask for an extension on their terms, or will ask to lower their monthly payment to you. You will not know unless you ask. If you delay any contact, you may be asking for trouble.
Too much delay is like gambling with your accounts receivable. Here are some issues that can develop:
1. The delinquent customer could move out of state. This would not make it impossible to collect but it will likely make it more difficult.
2. The delinquent customer could sell an asset that you might have been able to attach for payment later on.
3. A business customer could go out of business.
4. Your customer could incur more debt, be less able to pay you, or even declare bankruptcy.
5. Other more proactive creditor could take legal action and place liens on their property, wages, etc. You would then be behind those.
6. If you end up referring the customer at some point for outside collections, you could incur a higher contingency collection fee. Higher fees for older accounts (over a year, or in some cases, over 180 days) are common, because older debts are more difficult to collect.
There is nothing wrong with asking people who owe you money to pay you. Listen carefully and be compassionate with people who are not working. If they cannot pay you now, work with them on payment terms for the future. You will find, however, that many people are happy to hear from you and willing to pay you. The only way you “lose” if you delay too long, or do nothing.