Dear Crabby,
I work as a credit and collection manager for a mid-size tools distribution company, and I have found myself in a very uncomfortable situation involving one of our customers, who also happens to be my cousin.
About a year ago, my cousin contacted me and asked whether he could purchase approximately $10,000 worth of tools from our company. I explained that I could not give him any special treatment and that like all new customers, he would need to complete a New Customer Credit Application and go through our normal credit review process. He agreed without hesitation.
After reviewing his application and credit information, our company approved a $10,000 credit limit. His first order was paid promptly, as were several additional orders placed over the following months. Everything appeared to be going smoothly.
However, the last order for approximately $8,000 is now more than 90 days past due. I have called, emailed, and left multiple messages for my cousin, but he has not responded to any of my attempts to contact him.
According to our company’s credit policy, any account more than 90 days past due must be reported to both the CFO and President for review. Here is my problem: although I did not provide my cousin with any special credit considerations, I am extremely uncomfortable disclosing both the delinquent account and the fact that we are related. I am worried that even the appearance of a conflict of interest may get me into trouble with management.
What should I do?
Signed: I’m in Hot Water
Dear Hot Water:
First, let me say this: take a deep breath and resist the temptation to hide the situation. In fact, failing to disclose the relationship now would likely create far more problems for you than the delinquent account itself.
From what you described, it appears you handled the original credit approval properly. Your cousin completed the same application process as any other customer, underwent a standard credit review, received a reasonable credit limit, and initially established a good payment history. In other words, you neither bypassed company policy nor extend improper favoritism.
That said, the appearance of a potential conflict of interest is still important, particularly once the account becomes seriously delinquent. Senior management may reasonably ask why they were not informed earlier that a family relationship existed. Transparency is critical in credit management because trust and objectivity are essential to the role.
My advice is to proactively bring the situation to the attention of the CFO and President immediately. When you do so, clearly explain the following:
- Your cousin completed the standard credit approval process
- No exceptions or special terms were granted
- The account originally performed well
- Collection efforts have already been made
- You are disclosing the relationship now to maintain transparency and compliance with company policy
Most reasonable executives will appreciate your honesty and professionalism. In fact, your willingness to disclose the matter voluntarily will likely strengthen management’s trust in you rather than weaken it.
Going forward, this situation also highlights why many companies establish formal policies regarding business relationships involving relatives, close friends, or personal acquaintances. Even when no wrongdoing occurs, these situations can create emotional pressure, awkward collection dynamics, and concerns about impartiality.
And one final piece of advice: if your cousin suddenly calls you back after management gets involved, don’t let family guilt interfere with your professional responsibilities. Thanksgiving dinner may become a little awkward this year, but unpaid invoices rarely disappear simply because two people are related.
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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