When does a Sale become Risky?

Not the Tom Cruise film that carries the same title?


Not the Tom Cruise film, but its true when does a sale become Risky business – are they going to cancel, pay a deposit etc etc?

The following is my experience of a conversation with a key decision maker, based out of the Middle East and here I was educating him about when is what perceived as a Credit Risk.

In this situation, there was a Sale that was made around three months ago, but the Invoice was made out around mid August.  From a Credit point of view, the clock starts ticking as soon as you issue the Invoice.

For this particular client, the standard terms were around 10-15 days, but for anyone that has worked in and/or for Middle Eastern jurisdictions Clients do note usually pay around the 10-15 day mark – its more a case of 60-90 days if you are lucky.

In a nutshell in the UK, outstanding Invoices would usually be conversated on with the Accounts Assistant, Accountant, and/or if its a larger company then it should be an Accounts Payable Team.

In the Middle East, you are entirely in the hands of the person that you have been introduced to – so if they say jump – you have to say how high.  There are no rules and regulations out there.

So from a world wide point of view, you have to take the vision of Risk loosely.  The way you would consider a risk, may not have the same impact as to someone sitting half way around the world as you.

Back to the earlier example, the Debtor has been invoiced in mid-August, and you are expecting payment to be made within the first two weeks as per standard terms – however they opt to make a payment to you in mid-November – this is some 100 days after the initial invoice date.

Imagine how that would affect your cash forecasting when you were anticipating that coming in earlier?  The reason for this delay is that the operating expenses here is more important than paying off suppliers.  This is quite a large balance too, but that payment is promised in mid November, so it shouldnt be a risk?

So what are your thoughts on this – how would you get around it?

  • Maybe offer a payment plan to them – so therefore it gets something into the bank
  • Ask to see a list of their creditors if they are making excuses that they cannot pay you?
  • See if you can restructure the goods and/or services you provide to them?
  • See if you can offer a basic product for future business owners who may suffer this kind of issue and/or a problem that may occur?
  • Explore their reason a bit more – so that you can keep tabs on how long it would be before you get paid?
  • Keep in close contact with them, especially with the key decision maker – as you would like them to commit to you on a longer term basis.

There are so many options that you could take here – but its a question of who and how you ask for it that is the key here?

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