Many economists believe that we are headed into a recession. We are starting to see credit grantors "tighten the purse strings." While I wish I had a magic eight ball, you should strive to have a healthy balance of risk versus reward.

While Quarter 4 is notoriously the time for increased bad debt, there are still steps you can take to put yourself in the best possible position.

Step One: It's important to put a large focus on your 90+-day past-due customers the first couple of weeks of October. Find out, what's the story? Don't be afraid to have direct conversations and ensure that your delivery and tone is, we want to help you! You will always get more bees with honey.

If the customer is still doing business with you, this is the time to take a strong stance. The customer at a minimum should be held to paying you their average weekly invoice plus 10% of the past due balance in order to avoid service interruption. If the customer can't make that minimum commitment, you have to turn off the faucet until they can. If you don't, the customer within short order gets to a balance owed they cannot afford to pay. Don't let your exposure get there!

Quick Exercise: Take the customer's average weekly invoice for the last 6 weeks to calculate the payment plan. For example, if the customer spent $6,000 in total in the last six weeks, the average weekly invoice would be $1,000. If the customer's total past due balance is $20,000, the payment amount should be $2,000. In all, the customer should be paying you $3,000 minimum a week ($1,000 for their new invoices + $2,000 for the past-due invoices) until current.

Step Two: You should have in your customer notes, what their holiday check/payment schedule will be going into the end of the year. No, it's not too early to ask these questions. If they cut checks on Thursday, ask them to include two weeks in the week before Thanksgiving's payment. If they only pay once a month, try to get an extra week or two in October, November, and December monthly payments. The early bird catches the worm here!

You are being proactive versus reactive and you will be surprised at how many customers appreciate that. Remember, the phrase "help me help you; I just want to ensure you aren't experiencing any late fees or service interruptions due to the holiday."

Step Three: Educate your customers as much as you can on mailing time. USPS, UPS, FedEx, and DHL all have extended delivery times during the last three months of the year. Why? Because they can't guarantee that they will be able to adhere to their normal service guarantees without doing that. Why is this important to you? If they aren't paying you electronically, your payments are being mixed in with all that increased shipping volume. There is an increased likelihood that your payment is completely lost or at minimum will experience added delays in posting.

Quick Tip: Do whatever you can to get the payment over the phone, online, or electronically pushed to you. This will completely avoid the delays faced in step three. "Mr./Mrs. Customer I don't want to see a late fee or service interruption because someone lost or delayed your check in the mail. Processing electronically during Quarter 4 can ensure that it doesn't happen. We can always resume the mailing of your checks in January."

Step Four: Educate your sales leaders, senior management, and collectors proactively. Use terms like, "Historically, Quarter 4, is when organizations go out of business." While you want to ensure that sales growth and revenue is the primary focus, you also want to ensure that its collectible revenue and not just billed. Strategize together, what are ways that you can ensure you are lockstep with each other going into the final months of 2019. Is it having a bi-weekly 30-minute meeting? Is it a new top 50 exposure list? You want to see them achieve all their sales goals but mitigate exposure as much as possible.

Quick Tip: If you get an opportunity for a meeting or email communication. Share with the sales team the proactive payment plan options. If they know they have options to avoid lost revenue (service interruption), they will proactively come to you. Remember it's all hands on deck, so the entire organization should have their eyes and ears open.

Step Five: Work with your sales team on large projects, orders, and new customers. Take the extra precautions especially during these months to ensure credit risk is managed. Just because they want to give you all this revenue, doesn't mean they can handle the bill that comes with it. This is an increased time where organizations will call with urgency, maybe their normal vendor couldn't supply the order. Maybe they had a special project that needed to be filled. Don't skip doing a quick credit check and calling their vendor references before taking on that big order.

Lastly, trust your gut and instincts during this time. A customer can be asked for a prepayment, upfront partial deposit, etc. if you sense financial distress. These minor adjustments and tips in the collections process could save your company a large bad debt number. Remember it's a healthy balance between revenue and loss.

I hope you see purposeful decision-making throughout the steps mentioned above. If not, feel free to reach out to me via email at I would love to hear your thoughts. Even better, #chimein on my personal LinkedIn page where this article will be shared and published for open comments.

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