There are many times when third party collection providers hear from the client’s debtor that the reason they haven’t paid is because they’re still waiting for their own outstanding receivables to be paid. Upon hearing this, on a case-by-case situation, it may be feasible to collect on the debtor’s behalf to kick start the cash flow chain. In other words, if the debtor’s past due receivables can be collected, that may kick start the cash flow assembly line in which they can turn around and pay their creditors.
In my professional opinion, offering this kind of payment situation depends on a few factors:
- Does the debtor have the will and volition to pay the client’s invoice(s) but not the capacity?
- Does the debtor have a viable business and the only impasse is that their cash flow is stuck in rut?
- Will the debtor at least pay some significant portion of the client’s invoice(s) to show good faith?
- Will the client give their authorization, seeing this as a workable opportunity?
In the past, when these factors have been met, we have given this circuitous collection route a try that can turn into a win-win-win situation for all parties involved.
- As the debtor’s receivables are collected and paid to us directly, we are able to remit to the debtor less the client’s payment — increasing the cash flow of both parties.
- At times, the relationship between the client and the debtor has been restored, albeit under different credit and payment terms and conditions.
- We feel that our services are viewed as a positive and constructive resolution to a difficult situation.
Your comments are most welcome.
Nancy Seiverd, President, CMI Credit Mediators, Inc. (nseiverd@cmiweb.com)
