Advising Clients During A Downturn
In a downturn, debtor risk rises across the board. Clients who tighten their credit discipline early ride it out; those who do not can find their own survival threatened by others' failures.
In this guide
- Recognise how a downturn changes debtor risk
- Tighten credit discipline without choking off sales
- Prioritise cash collection across the ledger
- Act early on accounts showing distress
7 min
How A Downturn Changes The Picture
When conditions tighten, even reliable customers can slow down, and weaker ones may fail outright. The danger compounds: a client's customer fails, the client takes a loss, and that loss strains the client's own ability to pay their suppliers. Debtor risk stops being an isolated problem and becomes a chain reaction.
Advisers add real value by helping clients see this early. The instinct in a downturn is often to chase revenue at any cost, but writing more sales to shaky customers can deepen the hole. Protecting cash becomes at least as important as winning work, and sometimes more so.
Tighten Without Strangling
The aim is sharper credit discipline, not a freeze on trading. Practical steps include reviewing terms, checking new customers more carefully, taking deposits where they were previously waived, and being firmer about limits for higher-risk accounts. Each tightens risk while still letting good business through.
Help clients apply this proportionately. A blanket clampdown can cost good customers and sales the client needs; the goal is to apply more caution where risk has genuinely risen. Targeted tightening protects the business without turning a downturn in the market into a self-inflicted downturn in the client's own revenue.
Make Cash The Priority
In tighter times, getting paid promptly matters more than ever. Encourage clients to shorten the gap between work and invoice, follow up overdue accounts faster, and not let balances drift in the hope that things improve — in a downturn they often do not. Cash collected today is worth far more than a promise for later.
The ageing report becomes a daily tool rather than a monthly one. The Merion tools can help a client model how faster collection eases the squeeze, which often sharpens the focus on chasing money that is already owed before pursuing new sales.
Act Early On Distress
The accounts that will cause the most damage usually signal it first — slower payment, part payments, requests to extend, or a customer going quiet. In a downturn these signs warrant a faster response than usual, because the window to recover before a customer fails is shorter and closing.
Waiting and hoping is the costliest strategy in a downturn. Where an account is clearly slipping, prompt action protects value. The client can move quickly to refer a debt rather than let it age into a likely write-off as the customer's own position deteriorates.
Key takeaways
- A downturn turns isolated debtor risk into a chain reaction
- Tighten credit where risk has risen, without freezing good trade
- Prioritise collecting cash over chasing new, riskier sales
- Act faster on accounts showing distress — the window is shorter
Frequently asked questions
Should my client stop offering credit in a downturn?
Rarely entirely. The aim is targeted tightening — more caution on higher-risk accounts — rather than a freeze that costs good customers and needed sales.
What should clients prioritise when conditions tighten?
Collecting cash. Invoice faster, chase overdue accounts sooner, and avoid letting balances drift, because cash today is worth more than a later promise.
How quickly should clients act on a slipping account?
Faster than usual. In a downturn the window to recover before a customer fails is shorter, so prompt escalation protects value.
Add real value for your clients
Refer your clients' overdue debts and we recover them commission-only — you stay the trusted adviser.