Past due account receivable to current note receivable

Are you creating repayment terms for a past due customer? Do it on a promissory note!
When you have a past due receivable a decision needs to be made. Is it beneficial to your company to try and work out payment arrangements on their past due account or should you refer their past due account to a third party for collection?
If you decide to work out a payment arrangement with a past due customer determine what the repayment terms will be and have the customer sign a promissory note for the agreed upon balance and repayment terms. The body of the promissory note should specify the date(s) and number(s) of the invoice(s) that will be paid by the promissory note. Interest should be included in the promissory note as well as fees to be paid in the event of default, venue and jurisdiction, and an acceleration clause in the event of default in the terms of the promissory note.
Do you want to continue to sell the customer on credit terms? Depending on the value of the customer to your business and the dollar amount involved you may want to temporarily lower their credit limit and/or place the customer on COD terms or shorten their repayment terms. For example, if you have been selling the customer on net 30 terms you may want to temporarily change their terms to net 15 or even have them pay weekly. Other options include the use of joint check agreements and lien rights depending on what industry you are in.
An updated credit application should be completed by the customer and properly evaluated before considering any future sales on credit terms. It is also suggested that both the promissory note and updated credit application include a personal guaranty when applicable.