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Collecting the Impossible: Securing payment on seasonal unsecured Accounts Receivable

Case Study: How TCD Helped a Client Manage Seasonal Trade Receivables and Secure Financial Stability

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MID-market manufacturer

Seasonal Business

1 receivables solution

About the Client*

A well-established manufacturer that generates the bulk of its annual revenues from seasonal sales.

*Due to the sensitive nature of the data, the client’s name has been omitted from this study.

The Challenge

A long-time customer wanted to place large new orders, but still owed a seven-figure balance from the previous season. Upon investigation, TCD discovered that their customer had been following the same repayment pattern for five consecutive years:

  • Using revenue from the new season to pay off the previous season’s debt.
  • Allowing the overall debt to increase every year so it was now well over several Million dollars.
  • A potential default that large could expose client to significant financial risk.

When the client approached TCD, they faced a difficult decision: pursue the outstanding balance and risk losing future sales or continue extending credit and risk further financial exposure. TCD quickly developed a plan to secure new sales while collecting the past-due amount.

The Solution

Strategic Intervention: Securing Payments and Protecting

TCD recognized that the manufacturer could use lien rights to retain ownership of the products until full payment was received. Here’s how the strategy unfolded:

  1. Enforcing lien rights: TCD advised shipping new products directly to end users (bypassing the dealer’s warehouse) and filing pre-liens. This ensured the manufacturer retained ownership until payment was made in full, giving them leverage over the transaction.
  2. Interest-bearing installment plan: To address the old debt, TCD helped the client set up a structured, interest-bearing payment plan. This allowed the customer to continue receiving product, ensuring cash flow for both parties.
  3. Risk mitigation with personal asset pledges: When the customer defaulted on the original payment plan, TCD developed a stricter arrangement—requiring the debtor to pledge personal property as collateral for a new loan. This provided additional security, ensuring that if the debtor defaulted again, the manufacturer could seize and liquidate assets to recover the debt.

While initially reluctant to pledge personal assets, the customer ultimately agreed to the terms to keep their business running.

The Results

This proactive approach yielded positive outcomes for both the manufacturer and their customer:

  • New sales were secured with lien protection, ensuring payment on future transactions.
  • The seven-figure past-due balance was paid in full, along with accrued interest.
  • The manufacturer avoided a major write-off and continued doing business with the customer.

The customer successfully managed new seasons under the mechanics’ lien process, meeting payment terms until their business eventually closed a few years later. Without TCD’s intervention, the client would have faced a significant write-off, putting their own financial health at risk.

Key Takeaways: Proactive Accounts Receivable Management in Action

This case highlights how strategic Accounts Receivable Management can transform a high-risk situation into a win-win outcome. With the right balance of risk mitigation and flexibility, TCD enabled the manufacturer to recover their debt, secure future sales, and preserve the business relationship.

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Measurable Results

  • Cash flow improvements of up to 50%.
  • Shrink day sales outstanding by 25% or more.
  • Increase unauthorized deduction recoveries by 200%.
  • Improve receivable performance management.
  • Improved financing opportunities and lender relations.
  • Live Data that improved strategic decisions.
  • Streamline aged receivable collection.
  • Improve customer communication.
AR Solutions for mid-market companies. AI and Human expertise combine to fully optimize Accounts Receivable in any industry.

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The Credit Department is the first and only true credit management outsourcing firm in the U.S., managing trade receivables for companies worldwide. We have worked in more than 100 industries to bring about change and dramatic results in our customers’ order to cash cycles.

As your strategic business partner, we become a cohesive and transparent component of your daily operations — whether you have an internal credit department or not. We also work with private equity groups to increase the value of portfolio company receivables to maximize cash flow from the asset. Our solutions integrate easily and cost-effectively with corporate systems within 24-48 hours.

If you’re ready to take control of your trade receivables management — and gain access to real-time cash flow forecasting — it’s time to contact The Credit Department.

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