When a customer stops paying: the calls you make

Every brand selling on credit eventually meets an account that stops paying. The failure is almost never the moment itself. It is the six months before it, during which the signals were visible, the supply kept going, and the paperwork that would have helped was never collected.

Slow payer or credit event: the signals arrive before the silence

The pattern changes before the money does. Promised dates start moving repeatedly, with a different reason each time. Instruments get post-dated further out, or one comes back unpaid whatever the stated reason. Their accounts desk stops answering while their purchase contact keeps placing orders. There is turnover in their finance team. They ask you to bill a different entity in the group. Another supplier calls to ask, carefully, whether you are getting paid.

The clearest single signal is orders growing while payment slows. A business short of cash buys stock to sell for cash, and the supplier still shipping is funding it. Look at public traces too: for a registered company, late filings are information, and so is a competitor quietly pulling stock from the same account. The distinction is behavioural. A slow payer is late but predictable and still engages. A credit event goes quiet and gets hungry.

Stopping supply is the hardest call and the most important

It is hard because everyone in the room has a reason to keep going. Sales sees a target. The counterparty says payment is coming with the next order, which is sometimes true. The receivable feels recoverable only while the relationship survives, so stopping looks like the act that caused the loss. Meanwhile every further dispatch increases the amount at risk, funded by you and secured by nothing.

Set the trigger in advance, give it to a named person who is not the salesperson, and route it through the same dispatch block described in who really decides credit terms. Communicate it plainly and in writing, without accusation: supply resumes on cleared funds against a specific list of invoices. Give them a path back, because a customer who recovers will remember whether you were fair. What you can and cannot do about stock already sitting in their custody depends on your contract and the facts, so put that question to your own legal advisor before anybody acts on it.

Part payment and continued supply is the trap

The mechanic is simple and it catches good operators. They pay a fraction, just enough to justify the next dispatch, and the balance never actually reduces. Money is arriving, the account feels alive, and your exposure grows the whole time.

The test is not whether payments arrive. It is whether total outstanding is falling month on month, and whether the oldest invoice is still the oldest invoice. Apply receipts to the oldest invoices first and say so in writing, or you will find new invoices settled while the old ones sit frozen. Two cautions. Continuing to supply after you knew the counterparty was in difficulty can weaken your position later, and any payment offered as full and final settlement, on a remittance or on an instrument, should go past your own legal advisor before anyone banks it.

The evidence you should already be holding

This is the part nobody can retrofit. The file that matters holds signed and dated proof of delivery, the purchase order and accepted terms, invoices raised on the correct entity with correct tax details, an acknowledged statement of account or signed ledger confirmation, the correspondence trail with dated commitments in it, a record of every deduction raised against you and how you answered it, and any security you hold plus whether it is still current.

The most valuable and most neglected item is the ledger confirmation, easy to obtain while everyone is friendly and close to impossible once they are not. Deduction records matter for the same reason, and debit notes and claims shows what that trail looks like. All of it is the argument for the discipline in collections without wrecking the relationship: the routine work is the evidence. Keep it per customer in one place, not spread across a salesperson’s phone.

Write it off commercially, or keep chasing

This is a commercial decision and it is separate from any accounting or tax treatment, which belongs to your accountant. Commercially, ask four things. What is the realistic recovery, not the hoped-for one. What will further pursuit cost in fees and management attention. What would that attention earn on live accounts instead. And is there a reason to pursue anyway, since other customers watch how you behave and a reputation for pursuing debts is itself a collection tool.

Provision honestly and early. A receivables ledger carrying amounts nobody believes in distorts every decision made from it, including how much stock you buy. Writing something off commercially is not forgiving it, so keep the file live. Resist tightening terms for every customer because of one failure; tighten where the exposure is. If the real problem is that your cash is thin rather than that your customers are bad, that is a funding question covered in invoice discounting, and broader cash planning sits in working capital for marketplace brands.

The point where this stops being an operations question

There is a line, and crossing it should be deliberate. Formal remedies in India take a few general shapes: a demand issued through a lawyer, civil recovery, arbitration where your contract provides for it, an insolvency track that exists for operational creditors of a company, a separate route where an instrument such as a cheque was dishonoured, and a statutory regime that may apply if you are a registered micro or small supplier.

Naming the shapes is as far as an operator should go. Each carries its own conditions, evidence requirements, costs and time limits, none of which should be assumed from something you read, and all of which turn on facts specific to your contract and your counterparty. Take it to your own legal advisor before you send anything that reads like a demand. Two things are worth knowing while you decide. Claims do not stay live indefinitely, so waiting has a real cost, and how much time you have is a question for your advisor rather than a guess. And a legal notice is commercially irreversible with that customer, so settle whether you want them back before you send it.