At our firm, we’ve spent the last two decades helping companies across industries unlock dormant value, correct critical blind spots, and scale with confidence. We don’t just advise — we transform. Here’s a real story from a client in the heavy industrial sector that nearly lost everything due to a well-intentioned, but dangerous, business relationship.
The Situation: Trust Turned into a Liability
Our client, a respected OEM manufacturer of construction equipment, had a long-standing relationship with a key customer. Years of mutual trust had led to extremely favorable commercial terms for the customer — payment periods of 120 to 180 days. Historically, those payments had come in more or less on time, and the relationship seemed rock solid.
But that changed.
First, the payments began arriving late. Then, they were partial. And by the end of the year, the client hadn’t received full payments at all. Despite this, deliveries continued — partly due to the trust built over the years, and partly due to repeated verbal assurances from the customer.
This created a perfect storm. With over 12 months of unpaid invoices, the OEM had essentially turned into a private lender for their customer — bleeding cash and risking the viability of the business. They were, in effect, acting like a bank. But without the protections or pricing mechanisms that banks rely on.
The Analysis: When Trust Overshadows Process
When we stepped in, we made a detailed assessment of their commercial terms, credit control process, and contractual structure.
Here’s what we found:
- No formal credit management policies in place.
- No contractual language that permitted withholding delivery in case of non-payment.
- No requirements for advance payments, letters of credit, or bank guarantees.
- And most critically: a deep reluctance to confront the customer due to years of personal rapport.
This wasn’t just a cash flow issue. It was a governance failure, wrapped in a layer of misplaced loyalty.
The Fix: From Cash Crisis to Contractual Clarity
We took immediate action.
1. Contract Overhaul:
We rewrote the commercial agreement to include:
- The right to suspend deliveries if past dues exceed agreed thresholds.
- A payment structure requiring:
- 50% payment in advance,
- 10% of the past overdue balance with each new order,
- And the remainder backed by a Letter of Credit (LC) from a bank rated at least BBB+ (S&P or Fitch) or Baa1 (Moody’s).
2. Policy Implementation:
We helped our client develop and adopt a formal credit management framework, including:
- Risk-based payment terms
- Trigger points for commercial escalation
- Quarterly reviews of customer exposure
3. Strategic Mindset Shift:
We gave our client the confidence and clarity to enforce these terms, even if it meant temporary friction. We reminded them: a business that cannot survive cannot serve. Protecting their own sustainability was, in fact, in the best interest of their customer.
The Outcome: Order Restored — and Respected
Once the new terms were communicated, the customer initially pushed back. But once they saw the OEM was serious — and had clear, defensible policies in place — they complied. Payments resumed under the new structure. Old dues began clearing progressively. Most importantly, our client’s cash position stabilized, and their internal stakeholders could finally breathe.
Key Lessons Learned
- Trust is not a credit policy — and it’s not a payment guarantee.
- Long relationships can cloud judgment — always separate relationship from risk.
- Acting like a bank, without being one, is a fast track to insolvency.
- Strong contracts and enforceable terms are not just legal armor — they’re survival tools.
- It’s not about being aggressive — it’s about being responsible. Even good customers respect structure.
Final Word
This isn’t just a cautionary tale. It’s a powerful reminder that even great businesses can fall into traps when process gives way to personal comfort.
If you’re extending credit terms without safeguards, letting relationships override rules, or shipping goods on faith alone — stop. Let’s talk.
At our firm, we don’t just build marketing and growth strategies — we protect them.
💼 Ready to stop acting like a bank and start operating like a world-class business?
Let’s get to work.
