Over the past five years, I've seen a change in the payment patterns of our better accounts. The long-term, well-established customers have come to expect that creditors will accept slow payments. The challenge is to educate or encourage these valuable customers to pay on time, and at the same time to maintain a good business relationship with them. It's a fine line to walk.

Every credit professional has learned the basic skills of collecting accounts receivable. The list of excuses for nonpayment seems endless, and no matter how hard you try you'll never be able to anticipate every delinquency. In addition, the philosophy of many accounts payable departments seems to be: "When in doubt, take a deduction. The worst thing that can happen is you'll be proved wrong and have to repay it." Of course, in the meantime the customer has your product and your money, and you have a delinquent accounts receivable balance.

I've found that a healthy sense of suspicion is the best defense against slow payments. A sudden dispute on price or quantity received after the invoice becomes delinquent, one or more broken commitments for payment, a customer who's always out of the office, an account that always seems to need copies of large past due invoices but never the small ones, an accounting contact who is always out or in a meeting, all may be indications of an account in financial trouble. What can be done to address any of the above? Remember that

1. The early bird gets the worm. If your terms of sale are net 30, don't allow your collectors to want another 15 or 30 days before calling on your customer. Require prompt follow-up on delinquent accounts and on promised payments.

2. Time is money. The time spent trying to collect a past-due balance is time wasted if you don't also (a) remind the customer of your terms of sale, (b) explain that their payments delays are beginning to concern you, (c) ask for a commitment to more prompt payment in the future, and (d) flag the account for closer scrutiny in the future. Any delay in calling the customer to address a delinquent balance sends the wrong message--a message that the creditor is not especially concerned about payment.

3. Most customers want to be good business partners. In the event, however, that your records show an account's payments becoming irregular or slowing, flag that account for special attention.

4. Your lines of communication with customers must be open. When you call, obtain a promise to pay, and confirm the details (the amount, date, and check number). Ask for specifics. Requiring detailed information sends a message that you are serious about collection, and it leaves nothing contestable.

5. Your credit records must be kept current. Bad management and changing conditions in the marketplace can alter a customer's credit risk profile rapidly. Keep credit files current with up-to-date trade reports.

6. Disputed matters must be resolved quickly. If the slow payment is based on a dispute over quality, service, or pricing, a mutual settlement should be discussed. Insist that the undisputed amount be paid immediately and that the balance will be negotiated.

By tightening up your collection procedures, following up consistently, and making careful credit analyses, you can minimize your company's chance of loss. And never assume that the customer knows your credit policy. It's important to remind customers of their terms of sale when payments are overdue. Also try to discourage extended payment terms. Too many accounts with extended payment terms can endanger the cash flow of your company.