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Bectran Product Team
I
February 13, 2026
8 minutes to read
Credit scores are historical documents. They tell you what a company did six months ago, or how they paid their bills last year. While they are essential for establishing a baseline of trust, they often fail to capture the immediate operational reality of a business facing a cash-flow crisis today. By the time a liquidity issue reflects in a bureau report, the damage is often already done. Real credit risk management requires listening to the nuances in customer communication, identifying subtle shifts in payment behavior, and recognizing the specific excuses that signal a company is running on fumes.
Credit teams managing distressed customers report that the warning signs of insolvency rarely start with a bankruptcy notice. They start with complaints about terms, vague references to downstream delays, and requests for extensions due to project timing. This guide breaks down the behavioral signals that indicate a customer is in trouble, well before their credit score declines.
One of the earliest indicators of cash flow strain is a sudden dissatisfaction with agreed-upon terms. When a customer who has historically paid on Net 30 terms begins to argue that those terms are impossible to meet, it rarely reflects a clerical preference. It usually signals a liquidity gap. In many industries (specifically construction and manufacturing), businesses often rely on collecting from their own customers before paying suppliers. When their cycle slows down, they attempt to use your credit terms as a bridge loan.
Credit teams report customers struggling with cash flow due to project timing, complaining about Net 30 terms, and requesting Net 90 instead.
The shift from Net 30 to Net 90 triples your risk exposure. When a customer cites project timing, they are acknowledging that they lack the working capital to meet their obligations independent of their revenue cycle. They are effectively asking you to finance their operations. While this can be a valid request for a growing company, it is a dangerous sign for an established one. If the request comes with complaints rather than a structured proposal, it suggests they are reacting to a crisis rather than planning for growth.
What to do:
A common deflection tactic used by distressed companies is to blame their own inability to pay on a third party. This shifts the narrative from we do not have money to we are waiting for money. While this distinction might make the customer feel better, the result for your AR ledger is the same: non-payment. This is particularly prevalent in sectors dependent on insurance claims, government contracts, or large general contractors. The customer effectively tells you that your payment is contingent on their collections success.
Credit teams report companies with no operating cash, holding 20-30+ unpaid accounts receivable from insurance claims or government agencies. Contacts report working on collections themselves and looking into collection agencies to help recover outstanding balances.
These scenarios reveal companies that have lost control of their revenue cycle. When a customer ties your payment to their insurance claims or downstream receivables, you are underwriting the risk of their customers and the efficiency of their back office, not just the customer themselves.
What to do:
Sometimes, the warning signs are not specific operational issues but a general decline in confidence. Credit teams often have a gut feeling based on a series of small interactions: unreturned calls, vague answers, or high turnover in the customer's AP department. Capturing this sentiment is difficult but necessary. When a credit analyst flags significant concern about a customer's cash flow, it usually reflects the aggregation of dozens of small red flags.
However, concern is not a metric. To act on this, credit managers must translate this sentiment into specific protective measures. If the concern is significant, the credit limit should likely be suspended until the review is complete. Leaving the account open while the team monitors the situation often results in bad-debt write-offs.
There comes a point when early warning signs become active delinquency. At this stage, the focus shifts from credit analysis to collections enforcement. The goal is to secure the asset, not nurture the relationship. The transition to collections is often delayed because teams hope the customer will recover. However, clear communication is often the only way to force a priority payment.
Credit teams report customers are struggling financially and are issuing ultimatums: If we do not receive payment this month, we will send it to collections. This final step in the risk lifecycle acknowledges the customer's financial strain while linking it to a concrete consequence.
The Trap of Hesitation:
Many teams hesitate to send a struggling customer to collections because they fear losing future business. However, a customer who cannot pay is a cost center, not a revenue center. Setting a firm deadline is essential. If the payment does not arrive by the stated date, the threat must be executed, or credibility is lost.
If these signs are present in conversations, why do credit teams still get blindsided by bad debt? The issue is rarely a lack of data. It is a lack of connection between the data and the decision-makers.
Sales teams often hear about project timing issues first. They may empathize with the customer and advocate for Net 90 terms to close a deal or keep a project moving. If this information is not relayed to Credit as a risk signal, the extension might be granted under the guise of relationship building rather than recognized as a liquidity crisis.
Most credit reviews happen on a schedule (annually or semi-annually). A customer can go from healthy to insolvent in the six months between reviews. If the team is relying on manual periodic checks, they will miss the rapid deterioration that occurs between reviews.
Most ERPs are designed to track invoices, not conversations. A note about unpaid insurance claims might live in a sticky note, a spreadsheet, or an email thread, rather than in a central risk dashboard. Without a system to aggregate these qualitative notes, the pattern remains invisible.
To move beyond static credit scores, teams need to adopt a behavioral risk approach. This involves scoring customers based on their current interactions and operational reality.
Track how often a customer requests deviations from standard terms. A single request might be strategic. Repeated requests or requests accompanied by complaints about standard terms (e.g., Net 30) are high-risk indicators.
Measure the frequency of broken payment promises. If a customer says a check is in the mail or that payment is due next week and fails to deliver more than once, their internal cash controls are likely failing.
Identify customers who explicitly tie their payments to their own receivables. These customers effectively have a Pay-when-Paid clause in their mind, even if it is not in your contract. This segment requires higher scrutiny and lower credit limits.
Catching these signs early protects the financial health of the entire organization.
By pausing credit early, you stop shipping product to a customer who cannot pay, preserving inventory for solvent clients.
When you know a customer is waiting on insurance claims, you can remove their expected payments from your short-term cash forecast, giving Treasury a more accurate picture of incoming liquidity.
Managing a high-risk customer is labor-intensive. It involves constant calls, manual reconciliations, and internal meetings. Identifying these customers allows you to allocate resources more effectively by automating the dunning process or handing them off to a third-party agency sooner.
The difference between a managed risk and a surprise write-off often lies in the speed of information. Credit scores look backward. Your team's conversations look forward.
By listening to what your customers are actually saying, you can see the crisis coming long before the credit bureau updates the score.
Customers complaining about Net 30 terms and requesting Net 90? Blaming delays on insurance claims or government payments? Bectran's credit platform includes behavioral risk tracking that logs term extension requests and project timing excuses, Company Radar to verify broader financial distress signals (layoffs, legal actions, operational disruptions) in real-time, automated credit hold workflows triggered by broken promise patterns, and unified communication logs that aggregate qualitative risk signals from across departments—ensuring credit teams detect cash flow crises before they turn into bad debt write-offs. See how credit monitoring works.
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