by Joanne Martin, CCE, L.K.L. Associates, Inc.
Each new year brings its own set of challenges, and this year is no exception. With a new president and changes in the legislative branch, potential shifts in policy could affect the economy, business practices, and our personal lives. As I reflect on my own goals for the year, I’ve also been considering how these changes might impact my work.
As credit managers, it’s essential that we anticipate potential changes and assess how they might influence the companies we represent, our customers, and the accounts receivable process. Looking back at past economic fluctuations, we can see how they impacted credit and collections, providing us valuable lessons for the year ahead.
I’ve noticed that credit professionals—myself included—tend to pay more attention to shifts in the economy, both locally and globally, than most others. Over time, this heightened awareness has almost become second nature. I know it may sound a bit unusual, but the truth is that we track these developments because they directly affect our work and decisions.
In managing accounts receivable, it’s critical that we stay vigilant for signs that a customer may be struggling. By being proactive and documenting these changes, we can make informed decisions that ultimately protect both the company and the customer. Below are a few warning signs I’ve personally encountered and watch for regularly:
- Payment pattern changes or delays: When a customer’s payments slow down, it’s often a sign they’re also slowing down with other creditors. By staying active in trade groups like NACM and regularly checking credit reports, we can track these patterns early.
- Unfulfilled payment promises: When a customer promises to send payment, but the check never arrives, it’s a red flag that shouldn’t be ignored.
- Excuses without resolution: If every conversation with a customer turns into a long list of excuses, or they start blaming your company or other external factors, this can indicate deeper issues.
- Lack of communication: When customers stop answering or returning phone calls and emails, it’s a sure sign that something’s wrong.
I’ve learned that documenting these warning signs and our conversations with customers is vital. Proper documentation helps ensure that when decisions are made, we can justify them if needed, especially when sales or management question our actions. As credit professionals, our primary responsibility is to protect the company’s financial health. However, it’s also in our best interest to help customers avoid accumulating unmanageable debt, as this could ultimately harm their ability to stay in business.
Even in a stable economy, some customers will face difficulties paying their debts. Factors other than the economy—such as personal problems, lack of business acumen, poor financial management, and bad decisions—can all contribute to payment challenges.
At my company, we’ve been closely monitoring the economy for some time. We attend seminars and review economic reports to stay prepared. As we know, the state of the economy plays a huge role in determining whether our customers can pay their outstanding balances. By staying informed, we can be proactive in preparing for potential slowdowns or disruptions. While we can never predict exactly when or how a downturn will occur, we know that it will happen eventually. Unexpected events can throw the global economy into turmoil.
As credit professionals, it’s important to be diligent, but also compassionate when dealing with struggling businesses. Balancing the responsibility of protecting your company’s accounts receivable with understanding and empathy for customers facing tough times can be challenging. Sometimes, making tough decisions is necessary, but we must remain supportive and use every tool at our disposal—such as NACM and other resources.
I believe that 2025 will present both professional and personal challenges. The road to economic recovery may take longer than expected, and the road back to “normal” could be further away than we think. As credit managers, we’ll need to lean on each other for support and understanding. Together, we can navigate the challenges ahead and continue to help our companies succeed.
Stay strong, and let’s support each other in this journey.