It starts with a simple request. A good customer calls and says they need just a little more time. Business leaders want to help and your sales team doesn’t know how to say no... They trust the relationship and “need” the sales. So they agree to an extension. Net 45 becomes Net 60. Net 60 becomes Net 90. Before you know it, the invoice is so old that collecting feels uncomfortable and unlikely. The balance keeps growing, cash flow tightens and your business is financing theirs without earning a single penny of interest in return. This happens a TON in businesses all because the wrong person is usually making the final call on what to do. Not always the case, but over my 15 years there’s clear trends.
Here is the truth. When you extend payment terms without the right discipline, you are taking on risk that grows every day the customer does not pay. A sale is not a sale until the cash hits your bank, remember that.
Here is how to protect your business as customers try to push for longer terms heading into the new year:
Tie longer terms to creditworthiness
If they do not have a proven track record of on time payments, longer terms increase your exposure. Credit decisions should be earned. Not gifted. If they already pay you late, what makes you think longer timeline makes them pay you sooner? Hint, they won’t.Require partial payment before extending more credit
If they want more time on invoices already due, get something collected now. Action builds trust. Promises do not.Do not extend terms while balances are growing
If they owe more today than last month, they need to reduce the balance before you add more work or more product. Your cash flow cannot take the hit for their delays.Set a formal limit for every customer
Even good customers can put your business at risk. A clear limit stops balances from growing beyond what you can absorb if something goes wrong.Communicate expectations and consequences
If a customer knows you take payment terms seriously, they will too. When businesses enforce structure, customers respect it.
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Big companies push for long terms because they can. Small and veteran owned businesses often say yes because they want to maintain relationships. But the reality is a customer who asks you to wait for your money is asking you to finance their business for free. Your cash should be working for you not floating someone else who is slow to pay. You’re paying more for that business.
If you want help reviewing your terms and deciding which customers need tighter policies before 2026 arrives, reply to this message. I can help you protect your cash and still keep strong relationships.
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