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Managing Collections Under COVID

Jan 27, 2021

Written by Henry Rinder, CPA CFE ABV CFF CGMA
Henry Rinder is a member of Smolin Lupin & Co., PA, a regional CPA firm. Smolin serves clients in New Jersey, New York, and South Florida. Henry overseas client acceptance, evaluation, and collections for the firm.

Unfortunately, many businesses have experienced collection problems during the COVID-19 pandemic. Accounts receivable are a significant item on most companies’ balance sheets. Slow-paying or nonpaying customers/clients adversely affect the company’s cash flow. Cash is the bloodline of the business. Proactive measures can help identify and remedy collection issues before they spiral out of control and cause irreversible damage.


To stay on top of collections, be aware of the following common red flags:

Anonymous clients. Some prospective customers don’t seem to exist anywhere other than, say, a vague, unrecognizable email address. It’s not too much to expect that even start-up businesses have some online presence, a physical address, and a working email address and phone number. An effective policy is to run a background and credit check before signing up and extending credit to a new customer. Collection attorney Jonathan S. Goodgold, Esq., Managing member of Maitlin Maitlin Goodgold Brass & Bennett in Millburn, states, “you have a choice whether or not to enter into business with someone. Make sure there is a physical person to deal with who has a name and position. Get an EIN or SSN where possible. Get a personal guarantee where possible as well, since if it is a start-up, there is a likelihood the business may not survive and may not have the income to pay all of its vendors.”

Empty assurances. One warning sign is clients who ask that work on their product or service start immediately, without providing assurances that payment will be forthcoming. In many industries, it might be standard practice for suppliers to offer goods or services and follow up with invoices later. Consider the lack of credible assurances of payments to be a warning sign. That’s especially true if a prospective customer is vague on the budget for a project.

Future earnings as payment. Customers who promise some portion of future earnings as payment may be legitimate. But, before you begin work, nail down the terms and decide if the potential reward compensates for the significant risk you are undertaking. Also, understand the business and the people running the company before making this sort of arrangement.

Endless nitpicking. A client who regularly finds fault with minor details of a project may keep it from ever getting off the ground. While clients have a right to expect the level of quality promised at the outset of a project, those who seem always to find reasons to criticize products or services continually may be using their purported dissatisfaction to avoid or reduce the payment for their purchase. With these types of clients, you should have a short leash and document all of the purported issues where possible. If it goes to collections or collection litigation, be prepared to address the purported criticisms.


If you’re skeptical you’ll be able to collect from a customer, it’s wise to ask for a retainer or deposit upfront before starting a project or a personal guarantee. You can also request progress payments while the project is in process. Additional steps that can help expedite collections include:

  • Following up with a firm, but tactful, email when an invoice is overdue.
  • Moving to a phone call if follow-up emails are not generating a proper response.
  • Contacting the customer’s accounts payable staff or business manager if previous follow-up efforts aren’t working.

If you have clients that continue to withhold payment after these steps, it may be time to take legal action. When it’s necessary to pursue missing payments, persistence pays off.

BUSINESS TIP – Have a written contract with all new clients or customers that incorporates a personal guarantee from the company’s principal.


Delinquent payments and write-offs can damage your company’s operations and profitability. Contact us if your business is experiencing collections issues. We can help you sort out your options.

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