Although the recession officially may have ended, bankruptcy filings – a lagging indicator – continue to rise. Consequently, companies need to be extra vigilant when they decide how far to extend credit to their customers. A recent development for one of my clients (“Client”) illustrates this point.
Client sells its products exclusively through resellers. Over the course of 18 months, one of them (“Reseller”) had become Client’s largest customer based on the volume of goods purchased. Throughout that period, Reseller had paid every bill on time.