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Your Thoughtful Customers Are Correct... To Be Nervous....!

By Sid Chadwick, Chadwick Consulting, Inc. – 02/24/2023 Published in American Printer

It’s only when the tide goes out that you learn who’s been swimming

naked.”…..Warren Buffett, 1992 Letter to Shareholders, Berkshire Hathaway


We’ve had a few well-run Peer Group Members recently experience unexpected

“uncollectable bad debts.”

With recent Retail Activity Reports exceeding expectations, the Fed is now expected to raise interest rates three more times by June, and predictions are growing that - “the tide is preparing to go out.”

Our Federal Reserve continues to tell us that it is committed to “breaking the back of inflation” through: (a) raising interest rates, (b) reducing M1 (the money supply), for (c) bringing unemployment back to normal levels.

“The gap” between unfilled job openings and unemployment numbers – is unprecedented, and not really changing much.

Only disciplined organizations, that are constantly vigilant, and lucky, can make it through this financially squeezing tunnel – unscathed.

Experienced economists, like Larry Summers, to major banks and investment houses are consistent: “the probability of a Recession that mirrors or is worse than 2008-2010 - keeps increasing.”

And those predictions do not appear to incorporate or mirror the geo-political scene.

A Few Suggestions:

  1. Do not stop developing additional business – from credit-worthy customers and prospects. Be more purposeful and discrete.

  2. That said, be particularly vigilant of a new account that you’ve not been courting very long. (Who are they late in paying?)

  3. When evaluating credit extensions, be sure to count Outstanding Quotes (this activity requires your resources), Order Entry and W-I-P, and not just what has been invoiced.

  4. Work to Invoice W-I-P that’s been put “on hold.”

  5. Don’t hesitate to ask for up-front deposits for significant projects, and especially for 1st orders.

  6. Review all customers who are suddenly paying later than normal - by a week or more. Give them a polite courtesy call.

  7. Asking for signed personal letters of guarantee is not unusual.

  8. Be particularly vigilant of major customers wanting 60 and 90-day standard terms of payment. Will you “charge-back” if they’re late?

  9. Credit card payments should require an additional 2%, minimum.

  10. Sales Reps are to confidentially report back if a customer’s office or plant conditions have lost an orderliness, or are on short hours.

  11. We had our major commercial bank get us information re. major customers’ credit worthiness, including a recommendation re. credit risk. That information was often - helpful.


What you set the credit and collection rules to be should send a clear message to your Team. You want your representatives to understand “Why?”

Early on, as a cub Sales Rep for an international packaging company, I would get that credit application filled out early (within 1st 3 months).

What I noticed was that the smart buyers I was calling on, who were usually 20+ years older than me, seemed to smile as I presented that “early” credit application, and filled it in for them to sign, in front of them.

None ever refused to sign it.

Later, at a totally different organization and industry, as both Director of Sales & Marketing – and Credit Manager (the only company I’ve seen do that), our bad debts ran less than .001 of 1%.

To collect a potentially serious late, significant outstanding balance, I’d learned to reverse engineer my customer’s position, and often, purposefully make a friend - while collecting late money, by asking, “Ms. Smith, I need some work… and I need some money….. Where would you like to start?”

You could feel the smile on the other end of the phone, as we began working out both a payment and our next order.

“A hunch is creativity trying to tell you something.”……Frank Capra

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