Take these steps to manage customers’ financial issues
Question: How should my company handle a customer who is financially troubled or files for bankruptcy protection?
Answer: The first step to mitigate your company’s risk is to stay aware of your customer’s financial condition.
Consider implementing programs to monitor account delinquencies and late or slow payments, and require financial reporting.Reporting can be done on a regular basis (annually or quarterly) upon request or upon a triggering event.Once you suspect your customer is financially troubled, consider ways to improve your position.The simplest option to reduce exposure is to require cash on delivery or prepayment.
However, there will be situations that necessitate delivery on credit, so consider how to enhance your credit position. You could obtain a security interest in goods you are selling or in other unrelated assets, but this requires the customer’s consent and additional documentation.
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