When your customer has built up a sizeable account receivable, consider asking them to sign a promissory note to secure payment.
When customer is able to obtain materials from your company on a credit basis, there are times when they may incur a rather sizable debt. Your credit department has made collection calls and they keep getting promises that payment will be soon. They have a big job coming up, or they are expecting payments on a project they just finished. These types of delays can last for months.
In such a scenario, consider asking your customer to sign a promissory note for the amount due. You might think to yourself, why is this necessary? I already have their signature on a credit agreement? The answer is simple. It is far easier to prove up a debt based upon the breach of a promissory note, than a debt based upon the ordering and delivery of materials. There are many defenses that can be raised by a customer who is sued for failing to pay for materials. They can deny they got what they ordered, they can deny your accounting as to what is due based on previous payments, they can claim there were defects in the materials or that they did not arrive on time. This list of potential complaints goes on.
However, the defenses to a promissory note are far fewer. Generally, the promissory note constitutes an admission as to what was due. In court, you will not have to even bother proving up what materials were ordered and what materials were delivered. Instead, you basically only need to prove the existence of the promissory note and the failure of the customer to make payments on that note.
So don’t give your customer something for nothing. If they want extra time to make payments that are owed to you, ask them to put their promise in writing by way of a promissory note.