Hi Everyone,
I always enjoy hearing your stories about the unusual challenges that come up in the collections world, especially when they involve that tricky balance between keeping a customer relationship alive and protecting your company’s bottom line. Recently, I received a message from a credit manager who described a situation that may feel all too familiar to many of you.
Here’s what they wrote:
Hector, I’ve been dealing with a customer for several years who always pays, but never on time. Their invoices go well past due, I send reminders, I make the calls, and eventually the payments come in — but always weeks or months late. Our sales team insists this customer is “too important to lose,” so they keep sending me orders to approve, and I’m left wondering if I should tighten the leash or just accept the reality. Should I “trick” this slow payer into stricter terms, or keep handing out “treats” in the form of flexibility?
Here’s how I responded:
First off, thanks for sharing this — you’ve described a situation that just about every credit professional has faced at one point or another. A “habitual slow payer” is one of the most frustrating types of customers because they blur the line between risk and reliability. On one hand, they do pay — eventually — which makes it hard to justify cutting them off. On the other hand, they are essentially using your company as an interest-free bank, stretching terms far beyond what was agreed. That “float” they’re enjoying comes straight out of your company’s working capital, and over time it can weaken your ability to invest, grow, or cover your own obligations.
So, what’s the right approach? Should you play “trick” and impose tougher credit controls, or “treat” them with continued patience? In my experience, the best answer lies somewhere in the middle. Here are a few strategies for your consideration:
1. Change the conversation, not just the terms. Rather than endlessly chasing payments, invite the customer into a direct discussion about why they consistently pay late. Sometimes you’ll uncover legitimate operational issues (slow internal approvals, seasonality of cash flow, etc.) that can be solved with better alignment. Other times, you’ll find that the customer simply takes advantage of your flexibility. By addressing it head-on, you set the expectation that late payment is no longer invisible.
2. Use carrots before sticks. Before moving to “tricks” like reducing limits or moving them to cash-in-advance, try incentives for good behavior. Offer a small early-pay discount or prioritize fulfillment for accounts that stay current. Customers often respond to benefits faster than penalties, and if they truly value the relationship, they may be willing to change.
3. Know when to draw the line. At some point, repeated slow payments become a material risk. That’s when you need to “trick” — tighten terms, put orders on hold, or escalate involvement of senior management. The key is to communicate that these steps aren’t punishment but protection for your company. If the customer values the product or service enough, they’ll adjust. If not, then you’ve learned the hard truth that they may not be worth the ongoing strain.
4. And let’s not forget the sales team in all this. Their job is to generate revenue, and they often see credit restrictions as barriers. But you can turn the conversation by showing how much working capital is tied up in this customer’s account, and how that limits opportunities to serve other, more reliable clients. When framed as an issue of resource allocation rather than punishment, the sales team is more likely to support your position.
So, should you trick or treat a habitual slow payer? In reality, you’ll probably need a bit of both. Extend the “treat” of continued business and collaboration when they show improvement, but don’t be afraid to pull the “trick” of stricter terms if they continue to abuse your patience. In the long run, protecting your company’s cash flow is the real prize, and certainly sweeter than any Halloween candy.
Until next time,
Hector
Hector the Collector 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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