Dear Crabby,
Over the past several months, several of my long-time customers have started short-paying invoices, claiming that new tariffs are cutting into their margins. One customer in particular reduced a $100,000 payment by $15,000, stating it was their way of “sharing the pain.” When I pushed back, they insisted that it was standard practice in their industry and that I should just accept the short-pay as part of doing business.
Unfortunately, I’m seeing this behavior spread. Other accounts are hinting that they may do the same because tariffs are making imports and raw materials more expensive. Management is asking me whether we should just write off these differences to keep customers happy, but I’m worried this will set a precedent that’s difficult to reverse. What’s the right way to handle these tariff-based short-pays?
Sincerely,
Worried & Frustrated
Dear Worried,
First off, let me be clear: tariffs may be a legitimate cost of doing business, but they are not a legitimate reason for your customers to rewrite the terms of your contract. A short-pay without prior agreement is essentially a unilateral deduction — and if you accept it once, you risk training the customer that your invoices are negotiable after the fact. That’s a dangerous precedent, and I’ve seen too many credit teams lose millions over time because they “let it slide” in the name of customer relations.
Here’s how to hold the line without burning bridges:
- Document everything. Respond in writing that your invoices are payable in full as agreed, and that any disputes about tariffs must be addressed through price negotiations, not deductions.
- Loop in sales. Partner with your sales team so the customer hears a consistent message: pricing discussions are separate from payment obligations. If tariffs really make the deal unworkable, it’s the job of sales to renegotiate, not credit’s job to absorb losses.
- Escalate early. Don’t let short-pays linger. The longer they go unchallenged, the harder they are to collect. Set a clear internal policy that all deductions must be disputed immediately.
If management pressures you to “be flexible,” remind them that short-pays reduce revenue, distort reporting, and undermine cash flow. You can even show them the math: a $15,000 short-pay at a 5% net margin requires $300,000 in new sales just to break even. That tends to get their attention.
Finally, take a proactive approach. If you know tariffs or other cost increases are hitting your industry, initiate discussions with key customers before the next invoices go out. Offer options like adjusted pricing, staggered deliveries, or modified credit terms — but make it crystal clear that invoices already issued are due in full. By staying firm yet collaborative, you’ll protect your receivables without alienating good customers.
Stay strong,
Crabby
Dear Crabby is a credit, collection, and human resources advice column by Nancy Seiverd, President, CMI Credit Mediators Inc. Your thoughts and comments (nseiverd@cmiweb.com) are most welcome!
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