Uncollectible $100k Notice

As we approach the end of the year, many of you likely have triggers set in your system to conduct credit reviews on your customer base…right? I try to connect with new business owners or those who don’t have a strong background in accounting or are unsure of what to do.

I helped a business that was doing about $5-6M a month which is awesome, but they were carrying a large amount of cash owed to them on their books so we dove in….only to find they didn’t have an onboarding process at all. Just extending credit and terms to others blindly.

Every business wants more customers, more sales, and more opportunities. But not every customer is a good customer, financially. They could be the nicest person out there…but that doesn’t erase the fact they could leave you on the hook for $1M and you can’t collect. One of the biggest risks small businesses face is extending credit to clients who cannot or will not pay on time. When cash gets stuck in receivables, your business feels it fast. That is why credit analysis is so important.

Credit analysis is simply the process of evaluating a customer’s ability and willingness to pay you. It protects your cash flow, reduces write-offs, and gives you confidence that the work you deliver will be paid for.

Here is how small businesses and veteran-owned companies can use credit analysis to stay protected as we move into 2026.

1. Review payment history and patterns
If a customer consistently pays other vendors late, you will likely be treated the same way. Look for trends. Do they pay 15 days late every month? Do they dispute invoices often? Past behavior is one of the best predictors of future payment performance. Get a contract w/ terms signed.

2. Request basic credit information
You do not need a huge credit department. Start simple. Ask for trade references, a credit application to be signed covering your t/c’s (terms and conditions), and a bank contact. Good customers do not hesitate to share this information. Poor customers avoid it. Doing a high dollar deal? Get financials, always.

3. Set credit limits
Once you understand the risk, set a reasonable limit. This keeps you from overextending yourself. If a customer wants more work than their credit limit allows, collect upfront deposits or partial payments. This keeps cash moving and reduces exposure. Please, utilize this within your business. It kills me seeing businesses have limits and an approval system, but they don’t even follow it. What’s the point?

4. Monitor open invoices constantly
Credit analysis is not a one-time event. Continue monitoring payment behavior. If a normally strong customer starts paying slower, check in and adjust their limit if needed. Protect your business early rather than react late. This isn’t being mean, but a business decision.

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5. Use credit reports when needed
Tools like Experian, Dun and Bradstreet, Credit Safe and other vendor credit check platforms give insight into financial risk. They help you see if the customer has liens, lawsuits, low credit scores, or heavy debt. This is especially helpful when taking on larger contracts. Worth the cost you all.

6. Adjust terms when risk increases
If you see red flags, tighten terms. Shorten payment deadlines, require deposits, or switch to pay-as-you-go. You are not being difficult. You are protecting the company you built. Build that language into your contracts too so it’s able to be done and you aren’t held contractually to something else.

Credit analysis is not about turning customers away. It is about making smart decisions so you get paid for the work you do. When veterans and small business owners take time to evaluate customer risk, they avoid bad debt, strengthen cash flow, and build a more stable business.

If you want help building a simple credit review process or determining which customers may be putting your cash flow at risk, reply to this email and I will help you put a system in place.

Read this far? First to reach out to me and say “FREE CREDIT ANALYSIS” I will take a look at your current policy setup and structure and recommend how to improve it at no cost. Free. Nada. I know some small business owners on here could use this. Let’s go!

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