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How to Respond to Requests for Extended Dating
By Michael C. Dennis, M.B.A., C.B.F.

Suppose a customer approaches you and requests a six-month payout on the balance due...with a two-month moratorium in which no payments will be made. How should you respond? To some extent, the answer is that it depends on your company's internal policies, profit margin and financial condition. However, it would seem to make sense to make the following suggestions in response to this request:

  • Ask the debtor for a list of vendors that have been approached with the same request along with their telephone numbers

  • Ask for a separate list of creditors that have agreed to the six-month plan.

  • Ask if the customer has offered a better deal to any other creditors.

  • Ask what caused the cash flow problem.

  • Ask what they are doing to address the underlying problem.

  • Ask why they need six months to pay.

  • Ask if you will be paid interest.

  • Ask why they do not go to their bank for a loan.

  • Ask if they are willing to sign a promissory note, and if not why not.

  • Consider a counter proposal such as this: No moratorium, and we want the debt retired in four months, or

  • Ask for an immediate good faith payment of a substantial amount of the outstanding debt, or

  • Insist on a personal guaranty as well as a Promissory Note

  • Give serious consideration to refusing to extend any more to the debtor on open account terms, or

  • Offer a compromise. Tell the debtor that you cannot and will not increase your dollar exposure by shipping additional merchandise on open account terms. However, once the past due balance has been reduced as they make payments you will consider offering open account terms such as net 10 days. However, until the account is paid down you can only sell on terms of wire transfer in advance [or COD Cash, or even COD Company Check if you feel this is appropriate].

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