One of my biggest customers is very, very slow to pay. Should I cut them loose or hold on tight?

Dear Aunty B,

We are a very small company. My second biggest customer has threatened to walk, as he is $7,000 over his $10,000 credit limit and I have told him that I won’t release any more stock until his account is back under the credit limit.

He doesn’t have any amounts outstanding at the moment, but we always have to chase him hard to get him to pay even remotely on time.

He’s fully aware of his credit limit, and that I’m holding stock because we’re a really small company and if he went bust we’d be in serious trouble. Do I let this go, as it’s close to Christmas and stock is an issue for everyone at the moment, or do I go with my gut and let him walk?

Kind regards,

Vanessa,

Victoria

 

Dear Vanessa,

I think your gut is probably giving you the right answer here. I would usually suggest having a frank and open discussion with him, but it sounds like you’ve left him in no uncertain terms about your situation and why you’re using the tactics you are.

You don’t necessarily have to let him walk, but I would say you do need to hold the line on releasing more stock. If he really needs the stock, he’ll get himself sorted. This is not the time of year to be taking on big risks, believe me.

One last thing. It sounds like you’ve spent a lot of time chasing this guy and dealing with his various issues. He might be your second biggest customer now, but if you can use this time to go after new business I reckon you’ll have a new second-biggest customer in no time.

Be smart,

Your Aunty B

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