Accepting a proposal for a payout plan from a delinquent customer can be dicey business. As a credit professional, you know the devil is in the details. So before you sign on any dotted line, ask the following questions:
- What’s behind the financial problems?
The very best way to get this information is in writing. Request that your customer write down the reasons for the dried up cash flow. If you cannot get it in writing, take copious notes and then email them to your customer requesting confirmation that A) your notes are accurate and B) that they received the email.
- Can you obtain Financial statements?
Some customers may be reluctant to provide the latest fiscal year-end statements or recent interim statements. However, before you can accept any proposal, you must verify the claims. It’s in their best interest to provide this information.
- Has their bank declined their request for higher line of credit?
Chances are, your customer approached his bank for a greater line of credit. If they did and were declined, find out why. Talking with their bank officer to see where things stand will better help you gain a full picture of what’s going on.
- What other creditors has your customer contacted with a similar proposal?
A list of other creditors will help you see the scope and magnitude of your customer’s financial dilemma. When you know what they are facing, you’ll be better able to project how much money you can reasonable expect to get.
- Which of the creditors has accepted a payout plan?
Request a list of those who have agreed and if you can, find out the details of the plan. Again, if you know this kind of information, you can better gauge what kind of payout you can expect.
- What kinds of payment assurances are available?
Is your customer willing to sign a promissory note? Can they offer some other sources of money?
- What if they offer better plans?
You can request to be notified in the event that they offer another creditor a better plan than the one they offered you. You can further request that you automatically receive the better plan.
The more information you have in writing, the better. And since it is your delinquent customer asking you for more time to pay what is owed, you have the right to ask these questions. You may not get everything you request, but that too, is revealing when evaluating realistically what you can expect to collect and when.