Managing Credit: Advice for Businesses to Avoid Needing an Attorney
How Strong Companies Protect Cash Flow — and Enforce What They’re Owed ⚖️ Important Note This article provides general information for commercial businesses seeking to strengthen credit practices and protect recovery rights. It is not legal advice. Every contract, industry, and jurisdiction differs. Consult qualified counsel regarding your specific situation. TL;DR If a customer: Suddenly pushes for longer terms Claims they’re “waiting on payment” from someone else Breaks multiple payment promises Changes entities or payment routing Continues ordering while past due You should: Stop increasing exposure immediately. Document all commitments in writing. Require structured payment agreements — not informal extensions. Include attorney’s fee provisions in every commercial contract. Escalate strategically before leverage erodes. You earned the revenue.You are entitled to the cash. Revenue Is Earned. Payment Is Expected. For most well-run businesses, unpaid receivables are not catastrophic — they are infuriating. Sometimes it’s quiet frustration.Sometimes it’s sharper than that. You delivered what you promised.Your team performed.Your costs were real. And now someone else is using your capital as their float. Larger organizations may treat this as part of doing business. Smaller businesses often feel it more directly. Both reactions are understandable. The key is not reacting emotionally. The key is responding structurally. Imagine Improving Cash Flow Without Selling One More Dollar Imagine reducing receivables aging by 20–30% over the next two quarters. Imagine fewer awkward follow-up calls. Imagine cash forecasts that do not rely on “we hope they pay.” For strong companies, the issue is not survival. It is efficiency and leverage. Uncollected receivables tie up working capital, distort financial reporting, and quietly reward the customers who are least disciplined. In rare cases, unmanaged receivables can push companies toward serious liquidity strain. But most of the time, the damage is subtler — margin erosion and unnecessary exposure. Both are avoidable. The Early Signals That Should Never Be Ignored Credit deterioration almost never begins with confrontation. It begins with drift. Pay attention when a historically reliable customer begins to: Request Net 60 or Net 90 after years of Net 30 Blame “project timing” for missed payments Tie payment to insurance claims, government funding, or their own receivables Break two or more specific payment promises Change billing entities or request new payment routing Continue ordering while balances remain past due Become harder to reach or redirect you to lower-level staff Each one has a plausible explanation. But repeated deviations are not coincidence. They are signals. Some businesses respond with patience. Others respond with irritation. The disciplined response is exposure control. Contracts Are Leverage — Not Formalities Trust is valuable. Contracts are protective. One of the most powerful — and often overlooked — provisions is the attorney’s fee clause. In most U.S. jurisdictions, each side bears its own legal fees unless a contract or statute says otherwise. Without an enforcement clause, pursuing even a clear breach can become economically irrational. An attorney’s fee provision accomplishes three things: It discourages manufactured disputes. It makes smaller balances economically enforceable. It increases the pressure for early, practical settlement. When included in both your primary agreement and any personal guaranty, it changes the financial equation before a dispute escalates. It also communicates something subtle: your contracts are meant to be enforced. Similarly, clear interest provisions, no-waiver clauses, venue selection, and properly structured guaranties protect leverage. For companies extending substantial credit, secured positioning — where appropriate — can further protect priority in insolvency scenarios. These are not aggressive measures. They are disciplined ones. The Quiet Damage of “Friendly Flexibility” The most expensive losses rarely come from being too firm. They come from being too informal. A payment is missed.A sales representative smooths it over.An extension is granted verbally.Shipments continue. Nobody wants to escalate prematurely. Nobody wants to offend a long-standing client. But exposure compounds quietly. When payment plans are documented, commitments are confirmed in writing, and defaults are addressed consistently, leverage is preserved. When flexibility is undocumented, leverage dissolves. This is where indignation often lives — not in the missed payment itself, but in the realization that discipline was delayed. Exposure Control Is Governance Continuing to extend credit while an account is materially past due is not relationship management. It is unsecured lending. Strong companies protect margin by reducing exposure when warning signs appear. That may mean temporary credit holds, adjusted terms, deposits, or COD structures until balances normalize. It is not hostility. It is governance. Escalation Is Strategic, Not Emotional Collection agencies serve a purpose. So do creditor’s rights attorneys. The difference lies in complexity and leverage. For straightforward accounts, persuasion may suffice. Where structure, guaranties, asset positioning, or enforceability are in question, earlier legal evaluation often preserves more options than delayed action. The strongest clients do not escalate because they are desperate. They escalate because they refuse to be casual about enforcement. Some companies that ignore early signals eventually face real liquidity strain. Most do not — but they do absorb unnecessary loss. The disciplined path is not loud. It is deliberate. Frequently Asked Questions Isn’t some delinquency just part of doing business?Yes. But recurring deviations, broken promises, and structural changes are not “normal.” They are risk signals. Why is an attorney’s fee clause so important?Without one, you may bear your own legal costs even if you prevail. With one, enforcement becomes economically viable and disputes often resolve more quickly. Should we keep shipping to a customer who is past due but promises to pay?Continuing to extend credit increases exposure and weakens leverage unless carefully structured. What is the most common internal mistake?Informal term changes and continued credit extension despite repeated warning signs. Final Thought You are not unreasonable for expecting to be paid. You are not aggressive for enforcing agreed terms. Strong businesses earn revenue.Disciplined businesses collect it. When balances become significant and warning signs appear, early strategic review preserves leverage, protects liquidity, and ensures that what you are owed does not quietly become optional. Read the full article
