Conflicts with Customers – Michael Dennis, CBF


In a meeting last week with our VP of Sales,  this comment was made after a particularly lively discussion about whether or not a seriously delinquent customer with two broken payment commitments should be on credit hold:  “I think you enjoy situations involving conflicts with our customers.   It is almost like you made the decision to place this customer on hold because you can… and that you did not take time to look at all the facts including:

  • How devastating placing them on hold will be to them and to their production schedule
  • How much damage you caused our business relationship
  • How much business they so with us every year, or that their sales have been trending up
  • How bad it would be if we lost this customer, and how difficult it would be to find a replacement for our lost sales.
Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

In my opinion, the decision to hold was necessary and appropriate.  I also think thisjob is not a popularity contest.  I don’t think anyone enjoys conflicts, but conflicts in credit and collection are unavoidable and inevitable.

That’s my opinion.  What are your thoughts?

Michael Dennis’ Covering Credit Commentary. Michael’s website is

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

9 Replies to “Conflicts with Customers – Michael Dennis, CBF”

  1. I’m always suspicious that the reason sales are trending up with us, is because everyone else ALREADY has them on credit hold! And that has been proven to be the case sometimes. It is a balancing act between making sales and mitigating risk, and I’ve made mistakes both ways. However, your specific example shows a customer who has broken Golden Rules of Credit: He has shown an inability or unwillingness to pay, and he has broken promises. There’s no profit to be made, if we aren’t paid, and there’s less profit to be made, if we’re paid late.

  2. 1. You did not create the situation, the customer did.
    2. The prior sales haven’t been completed because they haven’t been paid. Increasing sales volume isn’t a sign of success, net profit is the measurement of success.
    3. You’ve helped the debtor prevent digging themselves into a bigger hole than they can climb out of, which helps promote their long term financial health and facilitating long term growth for your own company.

    If your Sales VP focuses on the short term gain, he will never see the benefit of your long term vision.

  3. Both great responses Teresa and DMarc. The damage caused to the business relationship by placing them on hold, will be no where as damaging to your companies bottom line if you keep shipping and they default on the entire debt. There will be no relationship to worry about.

    This is where our industry trade groups provide us the answer! A simple RFI into your industry will reflect the customers circumstance immediately. A sudden trend in increased sales usually is the same answer each time – they are on credit hold with everyone else or credit has been with drawn.


  4. Generally speaking, the criteria I deploy regarding if a customer should go on credit hold, is as follows: 1) I first want to determine the cause for the delinquency, i.e. short term problem or long term problem, and 2) is the customer willing to perhaps go on COD while establishing a relatively short term plan to weekly pay down the arrears.

    If they cannot enter into such a plan to bring them current in a relatively short time frame (2 months or less), then placing the customer on hold helps to begin to bring the delinquency problem under control.

  5. For your consideration… an alternative to credit hold might be COD or even cash in advance plus XX percent of the past due balance.

    Example: COD plus 25% of the past due balance.

    1. I totaly agree with dorothy’s approach , everyone is happy and reaching the same goal.
      This is the exact approach I have, order value plus 25 % plus any unpaid service charges since it does cost to carry receivables . You may want to add to your agreement somekind of payment plan should they not order one week or one month. In most cases,the payments are applied first to service charges then most recent invoices then the extra to the oldest invoices.

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