Risk is not always something the company has to suffer.
It can be discussed, reduced, shared, documented and structured.
This is an important idea for understanding the role of Credit Management. When a customer presents a risk, the company is not limited to two options: accept as is or refuse. It can negotiate the conditions that make the sale acceptable.
This negotiation can take place with the customer: payment term, down payment, guarantee, payment plan, payment promise, required documents, invoicing channel, portal, validation of service performed, payment calendar.
It can also take place internally: with Sales, Finance, Sales Administration, Operations, Billing, Legal or general management.
Credit Management is therefore also a negotiation function.
It rarely negotiates alone. It is not always the function that speaks directly to the customer. But it prepares, frames, argues and structures the conditions under which the company accepts to take a risk.
The core idea is simple: a raw risk can be turned into a structured risk.
A raw risk is unclear, poorly limited, poorly documented and poorly rewarded.
A structured risk is understood, framed, approved, monitored and linked to precise conditions.
Raw Risk
A raw risk is exposure accepted without sufficient structure.
A new customer requests payment in 90 days.
A late-paying customer requests a new urgent delivery.
A fragile customer refuses the down payment.
A strategic customer demands a very high limit.
A long project provides for invoicing only at the end.
A dispute blocks several invoices without separating disputed and undisputed amounts.
An invoice must go through a portal, but nobody knows the rules.
In these situations, the risk exists, but it has not yet been worked on.
If the company accepts without conditions, it suffers the risk.
It hopes that the customer will pay, that the dispute will be resolved, that the invoice will go through, that the term will be respected, that the order will be profitable.
Hope is not a credit policy.
The role of Credit Management is to transform this raw situation into a structured decision.
Structured Risk
A structured risk is a risk whose conditions are explicit.
The new customer can be accepted with a down payment.
The late-paying customer can be delivered after partial payment.
The fragile customer can receive a reduced limit.
The strategic customer can obtain a temporary limit approved by a committee.
The long project can be invoiced by milestones.
The dispute can be isolated from the undisputed amount.
The portal can be set up before the invoice is issued.
The risk has not disappeared.
But it has become more readable and more manageable.
This is the whole value of Credit Management: not only detecting risk, but also looking for how to make it acceptable when it can be.
Structuring risk means turning a diffuse threat into sales conditions.
Negotiating Does Not Mean Giving In
Negotiating risk does not mean that the company must accept everything.
Negotiating does not mean abandoning the credit policy. It does not mean giving up the limit, payment of overdue invoices, guarantees or invoicing conditions.
On the contrary, it means using these elements to build a solution.
A distinction must be made between concession and structure.
Granting payment in 90 days without any counterpart is a concession.
Granting payment in 90 days with adapted margin, credit insurance, a controlled limit and periodic review is a structure.
Delivering a late-paying customer without conditions is a concession.
Delivering after payment of overdue invoices or under a respected payment plan is a structure.
Accepting a large order without a down payment is a concession.
Accepting with a down payment, split delivery and committee approval is a structure.
Credit Management does not negotiate to give in. It negotiates to protect the value of the sale.
Negotiating Payment Terms
The payment term is one of the first subjects in risk negotiation.
The customer may request 60, 90 or 120 days. It may refer to its internal practices, its validation process, its group, its market or its own cash constraints.
For the supplier, this term represents tied-up capital.
It must therefore be negotiated as a real economic condition, not as an administrative detail.
Credit Management can help formulate the discussion.
A longer term may be acceptable if margin rewards it, if the customer is solid, if outstanding balance remains limited, if invoices are simple, if the relationship is strategic or if a guarantee exists.
But a long term may be refused or compensated if margin is low, if the customer is new, if the risk is high or if the company does not want to finance this exposure.
The negotiation can lead to a compromise: 45 days instead of 90, down payment plus balance at 60 days, invoicing milestones, early payment discount, or reduced limit until behavior has been observed.
The payment term is a value variable.
Negotiating Down Payments
The down payment is often one of the best ways to turn a raw risk into a structured risk.
It reduces exposure and commits the customer.
But it must be negotiated intelligently.
The customer may refuse a down payment as a matter of principle. It may say that it is not its practice, that it is a large account, or that the supplier must align with its conditions.
The supplier must then explain the economic issue.
Specific order.
High amount.
New customer.
Custom production.
Long project.
Country risk.
Limit overrun.
The down payment is not a sign of personal distrust. It is a sharing of financing.
The company commits resources before being paid. It is therefore normal for the customer to participate in financing the operation.
Negotiation can cover the percentage, the payment date, the milestones, the nature of the order or the gradual reduction of the down payment after several successful transactions.
The down payment can open a relationship that would be too risky without it.
Negotiating Guarantees
A guarantee can make it possible to accept a larger or riskier sale.
But the guarantee must be negotiated as a concrete element, not as a vague promise.
Which guarantee?
For what amount?
Issued by whom?
Valid until what date?
In which jurisdiction?
Callable under which conditions?
Does it cover the order, the total outstanding balance, a milestone, an advance payment, a period?
The customer may propose a parent company guarantee, a bank guarantee, a letter of credit, insurance or another form of security depending on the practices of the country and sector.
Credit Management must work with Finance and Legal to assess the real value of this guarantee.
A guarantee can transform a decision, but only if it is solid.
A guarantee that is difficult to activate, poorly drafted or insufficient can create an illusion of security.
The negotiation must therefore go down to the details.
Risk is structured through precise wording, not through general intentions.
Negotiating Payment Plans
When a customer is late, the payment plan is an important negotiation tool.
It makes it possible to organize payment of overdue invoices without immediately breaking the commercial relationship.
But a payment plan must be serious.
It must indicate the invoices concerned, the amounts, the dates, the consequences if the plan is not respected and the conditions for continuing deliveries.
A payment plan that is too vague structures nothing.
“We will pay soon” is not a payment plan.
“We will pay 25,000 euros on the 15th of the month, 25,000 euros on the 30th, then the balance on the 15th of the following month” is a usable basis.
Credit Management must also decide what happens during the payment plan.
Are orders blocked?
Partially released?
Delivered only if installments are respected?
Does the customer benefit from a reduced limit?
A payment plan is not only a collection solution. It is a condition for continuing the relationship.
Negotiating Payment Promises
The payment promise is shorter and more occasional than the payment plan.
The customer says that it will pay an invoice or a group of invoices on a specific date.
This promise can be useful, but it must be monitored.
A customer that keeps its promises can preserve trust. A customer that regularly promises without paying must be treated with more caution.
Negotiating a payment promise must be precise.
What amount?
Which invoice?
What date?
What payment method?
Who confirms?
Will proof be sent?
What consequence if the payment does not arrive?
The promise must also be recorded.
Otherwise, it gets lost in exchanges. Collections follows up without history. The salesperson does not have the information. The Credit Manager cannot assess the customer’s reliability.
The payment promise is a commitment. It must be considered as customer behavior data.
Negotiating the Documents Needed for Payment
Payment risk often comes from missing documents.
Purchase order.
Delivery note.
Acceptance report.
Intervention report.
Validated timesheet.
Certificate of conformity.
Validation of service performed.
Project reference.
Milestone evidence.
These documents must be discussed with the customer.
What is needed for the invoice to be accepted?
Who validates?
In what format?
At what time?
On which portal?
Which documents must be attached?
What validation deadline?
What rejection criteria?
This negotiation is very concrete.
It avoids discovering at due date that the customer was expecting a document nobody had requested.
Credit Management must encourage this approach: not only asking when the customer will pay, but also asking what the customer needs in order to be able to pay.
A payable invoice is prepared before it is issued.
Negotiating Portals and Invoicing Channels
Many customers impose specific portals or channels.
These tools can become sources of blockage if their rules are not mastered.
The practical conditions must therefore be negotiated or clarified.
Which portal should be used?
Who creates access?
Which login details?
Which formats?
Which mandatory fields?
Which statuses must be monitored?
What does “rejected,” “under validation,” “accepted,” or “scheduled for payment” mean?
Who should be contacted in case of blockage?
Can remittance advice be received?
Can the expected payment date be known?
The portal is not only an administrative tool. It is sometimes the mandatory passage between the invoice and payment.
If the company does not master this passage, it can lose several weeks.
Negotiating risk also means obtaining the operational conditions that allow cash to arrive.
Negotiating Deductions and Disputes
Customers may deduct amounts: penalties, discounts, expected credit notes, price differences, quality disputes, fees, offsets.
These deductions must be framed.
The customer must be asked to justify them, document them and distinguish them from undisputed amounts.
One essential point is to avoid a partial dispute blocking the whole debt.
If 10,000 euros are disputed out of an outstanding balance of 100,000 euros, Credit Management can request immediate payment of the 90,000 euros not disputed and separate treatment of the dispute.
This negotiation protects cash.
It prevents the customer from using a limited dispute to delay the entire payment.
It also forces the company to treat real disputes quickly.
An unqualified dispute becomes an area of involuntary financing.
Negotiating Internally with Sales
The first negotiation for Credit Management often takes place internally, with Sales.
The salesperson wants to serve the customer, preserve the relationship, reach their target and respond quickly to the opportunity.
The Credit Manager looks at outstanding balance, delays, limits, risk, margin, behavior and cash impact.
Both views are legitimate.
Internal negotiation consists of making them work together.
The Credit Manager can ask: what is the value of this sale? What margin? What potential? What urgency?
Will the customer accept a down payment? Partial delivery? A guarantee? Payment of overdue invoices?
The salesperson can ask: what payment would allow release? What temporary limit would be acceptable?
Which condition is negotiable? What argument should be given to the customer?
This discussion makes it possible to build a common position.
Risk is negotiated better with the customer when the company is already aligned internally.
Negotiating with Finance
Finance looks at overall cash, WCR, financing, forecasts, potential losses and the company’s ability to carry the outstanding balance.
It may accept or refuse certain levels of exposure depending on the cash situation.
A company under cash pressure does not have the same tolerance as a company with high liquidity.
Credit Management must therefore negotiate with Finance the acceptable level of effort.
Can we carry this outstanding balance for 90 days?
What impact on WCR?
What part of the risk is insured?
What maximum loss is acceptable?
What level of down payment is necessary?
Which decision must be escalated to financial management?
This discussion connects the customer decision to the company’s financial reality.
Credit risk is not isolated. It consumes capital and influences cash.
Negotiating with Sales Administration
Sales Administration plays a key role in turning the decision into an order that can be processed.
A negotiated credit condition must be correctly translated into the order.
Down payment.
Partial payment.
Blocking of the balance.
Split delivery.
Special payment term.
Mandatory reference.
Temporary limit.
Document to obtain.
Invoicing channel.
If Sales Administration does not have the information, the credit decision may not be applied.
Credit Management must therefore work with Sales Administration to make conditions operational.
A well-designed decision that is poorly entered can become a raw risk again.
Internal negotiation does not stop at the agreement. It must go down into systems, orders and execution rules.
Negotiating with Operations
Operations is essential when risk depends on delivery, service performance, milestones or evidence.
Can we deliver in several batches?
Can we suspend part of the service?
Can we obtain an acceptance report at each stage?
Can we produce a signed intervention report?
Can we organize formal acceptance?
Can we accelerate correction of a dispute?
Can we distinguish performed work from disputed work?
Credit Management must understand what is operationally possible.
Split delivery may be excellent from a credit standpoint, but impossible if the product is indivisible. An invoicing milestone may be useful, but only if the project team can document it. Evidence may be requested, but the teams must know how to obtain it.
Structuring risk therefore also means negotiating with those who execute.
Negotiating with Legal
Legal intervenes when risk must be framed through clauses, guarantees, contracts, general terms and conditions, reservations, penalties, liabilities or suspension mechanisms.
Credit Management can identify a risk, but Legal helps translate it into an applicable framework.
Retention of title clause.
Bank guarantee.
Parent company guarantee.
Right to suspend in case of delay.
Validation deadlines.
Tacit acceptance in the absence of justified reservations.
Cap on penalties.
Invoicing conditions.
Acceptance documents.
Dispute treatment.
This collaboration is essential in major or complex contracts.
Good risk negotiation often depends on precise wording in a contract.
If the clause is vague, collection can remain fragile.
Legal secures the structure. Credit Management expresses the economic issue.
Negotiating with Management
Some decisions must be brought to management level.
Strategic customer.
Exceptional amount.
Uncovered risk.
Very high exposure.
Major commercial impact.
Exception to the credit policy.
Arbitration between growth and cash.
In these situations, Credit Management must prepare a clear decision.
It is not enough to say: “the customer is risky.”
Exposure, risk, margin, possible conditions, available protections, cash impact, scenarios and recommendation must be presented.
Management can then arbitrate with full awareness.
Accept with conditions.
Refuse.
Request a guarantee.
Reduce the volume.
Approve an exception.
Renegotiate.
This negotiation with management makes it possible to treat major risks at the right level.
A major risk should not be handled through informal arrangements.
Building a Common Position Before Speaking to the Customer
Before negotiating with the customer, the company must be aligned internally.
If Sales promises delivery without conditions while Finance requires payment, the customer will receive a contradictory message.
If Credit Management asks for a down payment but the salesperson suggests that it can be avoided, the negotiation loses its strength.
If Operations accepts a milestone but cannot document it, the structure will not hold.
Internal alignment is therefore a condition of external credibility.
The company must know what it wants to request, what it can accept, what is non-negotiable and who carries the message.
Risk negotiation often fails when the organization is not coherent.
The customer perceives internal divisions and may use them.
A common position protects the decision.
Turning Raw Risk into Structured Risk: Method
To turn a raw risk into a structured risk, a simple logic can be followed.
First, identify the risk.
Is it linked to the customer, the amount, the term, the dispute, the invoice, the country, the contract, execution, data or organization?
Then measure exposure.
How much does the company risk? For how long? With what margin? What potential loss?
Then look for levers.
Down payment, guarantee, shorter term, limit, split delivery, payment plan, credit insurance, milestones, payment of overdue invoices, evidence, internal approval.
Then negotiate internally.
What is acceptable? Who approves? What operational constraints exist? What negotiation margin?
Then negotiate with the customer.
What conditions can it accept? What documents can it provide? What payment can it make? What guarantee can it obtain?
Finally, document and monitor.
A structure without monitoring quickly becomes raw risk again.
This method makes negotiation more concrete and more effective.
Example: Raw Risk Transformed Through Down Payment and Milestones
A new customer requests a service for 300,000 euros, payable 90 days after the end of the project.
The raw risk is high: new customer, significant amount, long term, final invoicing, no history.
Credit Management works with Sales and Operations.
The proposal becomes:
30% down payment at the start.
40% invoiced upon validation of an intermediate milestone.
30% invoiced upon final acceptance.
Payment at 45 days instead of 90.
Acceptance report planned for each milestone.
The customer accepts after discussion.
The risk has not disappeared, but it has been deeply transformed.
The company no longer finances the whole project until the end. It collects progressively and has evidence at each stage.
The raw risk has become a structured risk.
Example: Customer Risk Negotiated with Payment of Overdue Invoices
An existing customer has 80,000 euros overdue and requests a new delivery of 120,000 euros.
The salesperson wants to deliver to preserve the relationship.
Credit Management refuses delivery without conditions, but proposes a solution.
Immediate payment of 50,000 euros.
Partial delivery of 60,000 euros.
Balance delivered after payment of the remaining 30,000 euros.
Limit review after collection.
The salesperson negotiates with the customer. The customer accepts the partial payment because it needs the delivery.
The relationship continues, but exposure is reduced.
Negotiation made it possible to avoid two extremes: blocking everything or delivering without protection.
Example: Dispute Transformed into Partial Payment
A customer withholds 150,000 euros by referring to a dispute over part of the service.
The analysis shows that the dispute actually concerns 30,000 euros. The rest is not disputed.
Credit Management, Sales and Operations agree: the company recognizes that the dispute must be treated, but requests immediate payment of the 120,000 euros not disputed.
The customer agrees to pay the 120,000 euros and a working group treats the remaining 30,000 euros.
Cash risk is reduced.
The company avoids letting a partial dispute block the whole outstanding balance.
This negotiation is based on a healthy rule: what is not disputed must be paid.
Example: Poorly Aligned Internal Negotiation
A large order is blocked because the limit is exceeded.
Credit Management requests a 30% down payment. The salesperson, to preserve the relationship, tells the customer that the down payment is probably negotiable. Finance maintains the requirement. The customer waits. Delivery is delayed. Tension increases.
The problem is not only customer risk.
The problem is the absence of internal alignment.
Before speaking to the customer, the company should have defined a common position: minimum acceptable down payment, possible alternative, approval level, message carried by Sales or Finance.
Without alignment, negotiation becomes confused.
The risk is not structured. It is moved into internal tensions.
The Educational Role of Credit Management
Credit Management also has an educational role in these negotiations.
It explains why a down payment is requested.
Why a long term costs cash.
Why a limit is not arbitrary.
Why partial payment is necessary.
Why a guarantee must be formalized.
Why a partial dispute must not block the whole outstanding balance.
Why a payment promise must be dated.
Why an invoice must go through the right portal.
This education is addressed to customers, but also to internal teams.
When done well, it reduces the perception of blockage.
People understand that the requested conditions are not administrative. They serve to maintain the relationship within a sustainable framework.
Good risk negotiation often relies on a good explanation of the risk.
Negotiation Creates Value
Negotiating risk creates value because it preserves sales that would have been refused, while avoiding exposures that would have been dangerous.
It makes it possible to continue with a late-paying customer, but under conditions.
It makes it possible to accept a new customer, but progressively.
It makes it possible to support an important project, but with milestones.
It makes it possible to treat a dispute, but without blocking undisputed amounts.
It makes it possible to give commercial flexibility without losing financial control.
This value is often less visible than a signed sale.
Yet it is real.
A Credit Manager who turns a probable no into a secured yes creates better-quality revenue.
A Credit Manager who turns a dangerous yes into a framed yes protects margin and cash.
The Limits of Negotiation
Not everything can be negotiated.
Some situations must lead to a refusal.
A customer may refuse any down payment, any guarantee, any payment of overdue invoices, any transparency and any limitation of outstanding balance. In that case, the risk remains raw.
If the raw risk is too high, the company must not take it.
Negotiation has a limit: it must produce a real structure.
If no structure is possible, refusal becomes rational.
Credit Management must know how to negotiate, but also know when to stop the negotiation when minimum conditions are not met.
A risk that cannot be understood, limited, documented or monitored must not be accepted under simple commercial pressure.
Negotiation is not an escape from no.
It is a search for conditions. If these conditions do not exist, no remains necessary.
Key Takeaways
Credit Management is also a negotiation function.
With the customer, it helps negotiate payment terms, down payments, guarantees, payment plans, payment promises, necessary documents, portals, deductions, disputes and invoicing conditions.
Internally, it negotiates arbitrations with Sales, Finance, Sales Administration, Operations, Billing, Legal and sometimes management.
Its role is to turn raw risk into structured risk.
A raw risk is suffered: high amount, long term, uncertain customer, unclear dispute, difficult invoice, absence of guarantee.
A structured risk is framed: down payment, limit, guarantee, milestones, partial delivery, payment plan, payment of overdue invoices, evidence, approval, monitoring.
This transformation makes Credit Management more business-oriented and more useful.
It does not merely observe danger. It builds the conditions that sometimes make it possible to sell despite the risk, without putting the company in danger.
Negotiating risk means protecting cash while preserving the commercial opportunities that deserve to be pursued.