A publication for Credit and Finance Professionals
Final Demands
Do your “final demands” have a credibility gap?
When a company finds itself in a cash flow crisis it does not take long for the telephone to begin ringing and the mail to fill up with demands for payment. I think the old axiom “the squeaky wheel gets the grease” remains applicable; however debtors have become more sophisticated in their tactics of avoidance. Much of the time it appears, from documentation provided by creditors, that the debtors are more astute at buying time with stall tactics than creditors are at cutting the game time down to be in their favor.
Company principals who run liquidity challenged businesses become masters in a short period of time. For these debtors it is quite easy to spot a “soft demand.”
The overuse of final demands has less and less impact when each time the creditor is satisfied with yet another reason for delay, or a minimum payment. Debtors may not take the demand seriously, especially when they are not followed up on by the creditors. In some cases many months will go by before the final demand is sent and the amount ends up being placed for collection with an agency.
Credit ‘Hold’ … yes. Shipping ‘Hold’ … yes. If you are going to use the FINAL DEMAND…it should mean FINAL DEMAND.
Conversely, we see net 30 customers who are perhaps 6 months and longer past due. If you have had no payment in 6 months to a year on a 30 day invoice guess how effective a FINAL DEMAND is going to be; and if you are worried about meeting any legal obligations, rest assured that your invoicing and statements will more than meet any requirement you might come across.
Just ask yourself this simple question, if the customer has not responded to calls and statements why would a FINAL DEMAND be any different? Statistically, on billings 6 months and older, it is as if the demand was never sent, which means you just gave the customer additional time to ignore your account balance.
To summarize, use final demands in a timely manner, following written and telephone attempts to contact your customer. Do not send a Final Demand unless you are prepared to make it stick and see them through. Lastly, do not wait until an account is so far past due that the debtor will not or cannot take your demand seriously.
