So this business owes me money....

[Flash68]

Man this really hits home for me and my business over the past couple years (construction staffing/recruiting).

Here's what I've landed on. If you are diversified enough in your client base and revenue stream and this customer represents a small total outstanding aging for you at any given time (including his peak season), then maybe you tolerate his slow pay. And it sounds like you have your money cost factored in and the margins are what's keeping him around. If you can "afford" to drop him and he falls into that 80/20 rule, then consider that.

Not knowing your annual revenue/profit numbers, if he is a small enough portion of your business, then dump him. Not worth the hassle.

If he is a large portion of your business (doesn't sound like it) then dump him. Not worth the risk and cash flow shock issues it can present.

If he's somewhere in between, that's the tough call for you to make. I have mechanics lien rights in my state of business so I have some added protection many vendors/suppliers do not. Not sure what protection you have as far as liens, etc.

[bdahlg68]

Ignoring the $60k past due, he is currently a great customer. As long as he's paying COD, keep doing business and reminding him. If you have the ability, raise prices a bit, do so. He clearly doesn't have a ready alternative because COD is a pain in the you know what. In fact, he could be more past due elsewhere.

I'm working in a troubled supply situation where the company was $7 million PAST DUE in paying it's vendors! That is past due, not what they owe and does not include long term debt! Unreal....

This guy could be doing a similar thing. So, if you're not likely to collect with lawyers involvement, don't bother. Just take his money other ways.

[Sieg]

In the flooring industry over my 35+ years I've watched a lot of distributors get strung out by customers they've had relationships for years in down economies. Mediocre business practices and management usually catch up with them, especially in this downturn. I've seen more distributors take the hit than save the customer, though you'll most likely hear of the failure vs. the save.

Tough call, emotion is typically not your friend in business decisions, the party in debt usually takes advantage of the situation. We've had more than one long-time builder customer take us for $40-80K in the past few years filing bankruptcy.

Is writing off the bad-debt from a solvent customer an option? Can you have a talk with the owner (preferably in person) and voice your concerns and make your decision based on his responses?

[4mm]

Raise your prices to him over the course of the year in order to offset what he owes and then wipe the slate clean. Of course, discuss it with him first.

He probably owes elsewhere, that's why he is still doing business with you.

[GregWeld]

Typically I always judged WILLINGNESS over ABILITY. Some of my largest customers were the slowest pay - they knew they could get away with it.... but I'd bend over backwards to work with someone that DID WHAT THEY SAID THEY'D DO.... i.e., if we worked out a payment arrangement and they stuck to their side of the agreement. That's the WILLINGNESS.

I think you have to assess whether this customer has ANY willingness to get caught up. Then take it from there.

[Fluid Power]

Originally Posted by GregWeld

Typically I always judged WILLINGNESS over ABILITY. Some of my largest customers were the slowest pay - they knew they could get away with it.... but I'd bend over backwards to work with someone that DID WHAT THEY SAID THEY'D DO.... i.e., if we worked out a payment arrangement and they stuck to their side of the agreement. That's the WILLINGNESS.

I think you have to assess whether this customer has ANY willingness to get caught up. Then take it from there.

I understand that Greg, but it is not like the guy is not buying from us currently. I have trouble separating the current business with the fact the guy owes me 60k! The personal side says screw him and sue his butt into the stone age just to make his life miserable. The business side says the same thing that bdahlg68 says. Ignore the 60 and he is a good customer. We are making about 15-18% more than my 'good' customers pay. I guess my initial thought is to raise prices more and make the money back over the long haul. I have a meeting today at his office, I will report back later today!

[Beegs]

Originally Posted by Fluid Power

I understand that Greg, but it is not like the guy is not buying from us currently. I have trouble separating the current business with the fact the guy owes me 60k! The personal side says screw him and sue his butt into the stone age just to make his life miserable. The business side says the same thing that bdahlg68 says. Ignore the 60 and he is a good customer. We are making about 15-18% more than my 'good' customers pay. I guess my initial thought is to raise prices more and make the money back over the long haul. I have a meeting today at his office, I will report back later today!

Any threats towards him via lwasuits, liens etc...will only make him bolt. Increase margins even more, make the money up EVERYWHERE you can with him, that along with a friendly reminder of the 60K and you will most likely keep his business when the economy upticks.