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What is the percentage-of-sales method for estimating bad debt? What is credit insurance and how does it protect receivables? How do you prioritize collections to maximize cash recovery? What is the collection effectiveness index (CEI) and why use it? What legal/regulatory considerations apply to collections? How does dispute management connect to collections and bad debt? How do CECL and IFRS 9 change bad-debt estimation for receivables? What escalation options exist when internal collections fail? How do you handle receivables when a customer files for bankruptcy? What is factoring and how does it differ from a collections strategy?
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Accounts Payable & Receivable › Collections & Bad Debts

How do payment plans help recover distressed receivables?

Intermediate

Answer

A payment plan lets a struggling customer repay a large overdue balance in scheduled installments they can manage, improving recovery odds versus forcing a lump sum that triggers default. Plans should be documented, monitored for adherence, and may pause new credit until cleared, balancing recovery with continued risk.
Real-world example A customer unable to pay $30k at once agrees to six monthly installments, recovering the debt that might otherwise be written off.

Common follow-ups: When is a payment plan better than demanding full payment? | How are plans monitored?

Credit Control Aging Analysis Collections & Bad Debts
All 23 Collections & Bad Debts questions