Hello Everyone! 

I hope all is well and that your businesses are turning around. Like you, I’ve been watching many of the economic indicators and with the unemployment rate trending downward, I suppose one can start to feel encouraged that we are slowly rebounding. 

So many of you have written to me that as the economy starts to make a turnaround, you are also trying to make a U-turn to the credit & collection standards that were in place before the pandemic. However, you’re finding that some of your customers that were helped by your extending new flexible credit & collection conditions are pushing back as they like the new credit arrangements. Here are my thoughts on this issue going forward. 

The first thing I think every company needs to do when trying to understand credit policy is to determine their DSO, A/R Turnover, and other liquidity ratios that can tell you how far off the mark your company is now, in comparison to the pre-pandemic period. If your data indicates that you’re significantly off the mark, then you have really no choice but to be as assertive as possible in pulling back to pre-pandemic standards. 

Assuming that your data indicates that things are within an acceptable range, identify those customers that were extended more liberal credit terms and evaluate if you feel you should ask them to return to pre-pandemic levels. You may have found that by extending payment terms from say 30-45 days, or even to 60 days, these customers are now actually paying on time, in comparison to having previously always been paying 2-3 weeks past due. 

Conversely, if there has been a transition to a more concerning level, then a frank conversation is in store with your customer and either credit limits may need to be appropriately adjusted, payment terms shortened, or a combination of the two. 

On a case-by-case basis, you may want to send out a letter to those customers who are now being sold to on a more liberal basis letting them know that in view of the pandemic, accommodations were made. However, in the future it may be necessary to return to pre-pandemic terms and conditions. At least in this way, you’re gently putting them on notice that the present accommodation is not necessarily a permanent one. 

Hopefully, we won’t be having to experience such drastic measures in the future in which the country was shut down and the entire economy was sent into a black hole. Keeping a positive attitude, I’m looking forward to many better days ahead. 


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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