COVID 19 and Payment Terms

There is little question COVID-19 has stressed and complicated business models. Some people are really hurting and there is no way around it. If you are one of those folks, I encourage you to have a conversation with your suppliers now! We are seeing many relationships coming to amicable terms when timely conversation has taken place.
Understandably, the relationship is not so amicable when the cash flow conversation does not take place until the invoice is past due, the reminder is ignored and phone calls have not been answered. And horror of horrors ………… you said, “the check is in the mail” and it is not. In my 35 years working on problems, I have seen many relationships blossom following honest and forthright communication. I have seen zero relationships recover when someone says the check was sent and it was not.
When you are the supplier, let’s face it, you have a choice to make: whether to work with your customer or play tough while knowing that your customer may or may not survive without your help.
There are some definite boundaries you should respect when electing to accept payment beyond the original terms.
Both DRC and PACA require that complaints be filed within 9 months of when payment was due. In my experience that means the original due date. If your arrangement is going to be longer than that, you should include in the conversation that a DRC or PACA complaint will be filed. You will have control of when you choose to move forward for a decision, but the informal filing must be done within the prescribed time frame.
If you are utilizing the protections offered by the PACA Trust do not forget that you must put the customer on notice of the trust within 30 days of when payment was due and payment terms longer than 30 days are not recognized.
If you have decided to ride it out with your customer, get a firm commitment for them to pay something on a regular basis. That will signal they have some income and that if they miss a payment it will tell you their plan is not working.
Some things change and some don’t. What has not changed is that honesty and integrity apply equally in good times and bad. When your trading partner forgets that, it is time to take action and file a claim for yourself and for your industry.

Fred C. Webber