There are so many factors that impact the collection of an account. The depth of the customer relationship, the balance due, the period of time outstanding, the communication style, and the distance from your company are just a few of the major items that will frame your collection efforts.
Recently, I was talking with a colleague who had an unpaid A/R for approximately $625K, which began to become past due in March of this year. Their long-term customer was a mid-size distributor located in Spain that was a subsidiary of a very large multi-national corporation with over 10,000 employees. Although there was the occasional hiccup with a payment, it was resolved quickly, and the colleague rated their relationship as a 9 out of 10.
Then in mid-April, subsequent to sending a past due reminder, my colleague received an email from their customer’s president stating that they cannot make the payment due to a few sudden and major cancellations by their end users. This resulted in a huge surplus of specialized inventory in their warehouse. In other words, based on just-in-time inventory requirements, my colleague’s customer always ordered a significant amount of inventory to make sure that their end user’s assembly line was continuously kept timely supplied. When scheduled shipments were suddenly cancelled, the entire cash flow chain was impacted. The last sentence of the email stated, “We will let you know when things get clear and we are in a position to make payment.”
My colleague was thinking with total astonishment, “What do you mean that you can’t pay and that you’ll let us know when things get clear?” The email left my colleague completely hanging.
Feeling gut punched, my colleague, her manager, and their CFO tried to call their customer to understand more details, but the people in charge were not available. Or better said, they would not make themselves available. My colleague’s team tried again by sending a few more emails and making more calls, but the communication from Spain stopped cold.
So, what did they do? They decided to take a flight to Spain and make an unannounced visit.
A few days later in sunny Spain, in a suburb outside of Madrid, my colleague and her CFO, walked into their customer’s reception area and asked to speak with several of the people they know. The receptionist informed my colleague she would let them know that, “They came all the way from the US to see them.”
They waited, waited, and waited. Finally, the secretary to the CFO came out and led them back to a conference room where the CFO and others of the executive team met with them. Needless to say, they were quite surprised to see my colleague and her president.
Surprisingly, the meeting was amicable, and the upshot is that a payment schedule was agreed upon. In addition, the importance of responding to emails and calls was impressed upon them while they work through this period together.
My colleague told me that since April, two of the five scheduled installments were not made but at least the ball has started to roll, and they feel encouraged that more payments will be forthcoming. At a minimum, the communication has been reestablished and if payment cannot be made, their customer is letting them know in advance.
How far would you go to collect on an unpaid account?
Your questions and comments are most welcome (nseiverd@cmiweb.com).
Nancy Seiverd, President, CMI Credit Mediators, Inc.
