The Tale of the Reluctant Financier

Does this scenario sound familiar?

You have invested hours with your prospect; listened intently to their needs. You have discussed their requirements and answered all of their queries. You’ve carefully considered every word in your proposal and have agonised over every single line of your budgets.

You finally agree terms. Handshakes all round. Smiling faces. The gentle popping of Champagne corks. Life doesn’t get better than this.

So, what could possibly go wrong?

Your quote reflects 60 days standard industry payment terms. So, you have agreed to fund the period between supplying the service and the customer paying you. No problems there.

Fast forward 60 days and no payment has materialised. It’s probably not an issue, you tell yourself, just a glitch in the banking system.

It’s now seven days since they were due to pay. For some reason (after all everyone is so busy these days) your accounts team can’t get hold of their accounts team. Your finance manager is very good and, when she gets the time, she will give them a call.

A month has gone by and you can’t get a straight answer from their accounts department. At first, they said that they hadn’t seen the invoice and could you send them a copy, which of course you organise. Having heard nothing, you chase them again. Now they claim that the proof of delivery was missing on the file…Still nothing.

You would put the customer on stop at some point but since they haven’t placed any new orders, there is nothing to ‘stop’.

You’ve resisted involving your contact. After all you think it’s better left to your respective accounts departments to sort it out to preserve your relationship and hopefully secure all those orders they promised at the first meeting.

The days are flying by and perhaps a quick call won’t hurt? You can keep it light hearted, make a joke about it? So, you call.

Your contact assures you that this must just be an oversight and that you will get paid soon. Maybe this is simply because you’re a new supplier? It sounds plausible, so you ask your finance manager to advise you when the payment comes in, because of course it will.

About now you are becoming a reluctant financier of your customer’s business.

It is now 109 days since you provided your customer with what they needed. 109 days since you delivered your side of the contract. Your finance manager now writes to your customer to notify them.

It’s been 2 weeks since you wrote to your customer asking for payment. It is 123 days since you supplied your customer.

Time to add late payment interest and re-send? Hopefully they don’t take offence; they mentioned so many orders at the first meeting and it is on your pipeline report for next month.

Two weeks later and still nothing. This is the point at which you find out that they may be facing financial difficulties. Surely not. They are so well known in the industry that you wouldn’t even think to credit search them. So, what do you do now?

140 days since you supplied your customer and your finance manager has tried to obtain payment as best she can, dealing will all manner of ‘reasons’ for non-payment ranging from computer problems, the payment authoriser being off sick and the dog chewing the company internet banking payment fob (sorry we couldn’t resist that one!).

You have already paid in full for all of the costs associated with the transaction: the staff who fulfilled the order, the equipment and overheads, your finance manager’s time

Your profit margin on the original sale is diminishing by the day.

On day 160, you concede that you will have to use a lawyer to recover the funds outstanding.

On day 165 you learn that your customer has gone out of business. No money, no new orders and absolutely no profit – only real losses (and a set of broken dreams).

Don’t be a reluctant financier.

Engage with professional credit management at the earliest possible stage to establish the true position. Proper due diligence prior to customer acquisition, ensuring satisfaction on delivery as well as escalation through the collections process quickly, professionally and efficiently will ultimately save you time and money and improve your profitability.


Recent Posts

  • COVID - One year On

    As credit managers and credit controllers reflect on the challenges in managing their sales ledger asset over the past 12 months, we take a look at the various issues faced and how we expect that has changed the support needed from your credit control team moving forward.

    Read more

  • Entrepreneur of the Year Award

    Thank you to all of our great clients and team. Without them, I would never have won this award.

    Read more

  • B2B Credit Control - Instalments & Late Payment Interest

    "Historically repayment plan arrangements have been limited to the odd customer with cash flow issues, it is now more prevalent and credit control software needs to adapt to deal with that, free up the credit controllers time and provide accurate management information”. Janice Megram, Client Services Director, Veritas Commercial Services.

    Read more