Hi Everyone!

It’s Hector and I hope you had a nice New Year holiday. No question that last year turned out to be “annus horribilis,” but I hope you’re raring to tackle all the challenges and achieve many great things throughout this coming year. 
 
Over the past few months my inbox has been filled with requests for advice regarding what to do with a longtime customer that is now falling on difficult times. 
 
You know, in life we never know who is on their way up and who is on their way down. As the fallout from the pandemic and related lock downs won’t be firmly understood for several months to come, businesses that were flying high yesterday, could very well be down in the dumps tomorrow. For those long-term, loyal customers that contributed to our own success, trying to thread the financial needle of support is one of the most difficult things we face during these unpredictable times. 
 
That said, allow me to share my thoughts as a general guideline on how to consider your longtime customer as they try to get back on their financial feet. 
 
How much do they contribute to your gross sales? In my mind, this is probably the first factor to consider. If a longtime customer is a relatively small part of your sales, you may want to bear with them for a few more months or beyond. If selling your product to them at a minimum payment will help keep them afloat, then perhaps it’s worth it. If in the end they still go south, hopefully the financial damage will be minimal. 
 
As the amount you sell to a customer as a percentage of your gross sales increases, the impact to your own enterprise will dramatically increase. For example, let’s say that your long-term customer comprises 20% of your gross annual sales. This is considered to be a very high percentage, and mostly likely you need them just as much as they need you. My first thought in this situation is that if your customer is having difficulties, then you need to have a ZOOM call asap and talk about several kinds of strategies that might shore up your current distribution pipeline, or better yet, create new ones. Are there any new domestic markets to approach? Does selling internationally make sense? The key idea is that since your company’s survival is tied to theirs, it’s going to take a collaborative effort to keep both ships afloat. 
 
Then there’s the middle ground. Your customer is too large to carry along for an extended period of time, but still large enough to the extent that you can’t easily walk away. It all comes down to a case-by-case situation. Like any working relationship, honest and forthright communication is key. When you start to see the signs that payment is getting delayed, giving a call to the person in charge and having a straightforward conversation with them is paramount. You might want to let them know that you have always appreciated their business and that as much as you can, you will try to support them. Genuinely conveying the feeling that you’re on their side will make them feel comfortable to share more with you. This in turn will set the stage for what kinds of options are available, to help them get their financial footing back. Should they still not be able to get back on track, you’ll perhaps be in a better position from a human relations perspective to collect what you can from them. 
 
As we all try to move forward over the next few months, carefully navigating the economic fallout from the pandemic, hopefully the above will give you some guidance on how to grapple with long-time customers who are now facing difficult financial times. 

Hector
 
Hector the Collector is a credit and collection advice column by Nancy Seiverd President CMI Credit Mediators Inc. Your thoughts and comments (nseiverd@cmiweb.com) are most welcome!

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