30-second answer
A common error after payment default is continuing to ship while waiting for the distributor’s cash flow to improve, increasing exposure. Sudden suspension can also damage end-customer projects. Escalation should reflect contract rights, credit and asset position.
Applied situation (illustrative)
Consider a China-facing distribution scenario: Several invoices are overdue and the supplier threatens to stop new shipments. Reconcile deliveries, credits, disputed defects and payment routing before treating the entire account as one unpaid balance.
Classify the problem before calling everything “breach”
What the brand should focus on
Brands should set credit limits, aging tiers, supply-suspension triggers and restart conditions, and regularly confirm the actual debtor entity.
What the distributor/agent should focus on
A distributor relying on quality, rebate or return set-off issues should document them early rather than withholding payment without a clear written basis.
Clauses and records to check
- Invoice maturity
- Acceptance evidence
- Credit note
- Set-off
- Shipment suspension
Reconcile invoices with deliveries, credits and defect notices before demanding the entire ledger balance. For a China-facing chain, reconcile the Chinese and English versions with orders, seals, invoices and the receiving account. Identify any gap between the brand owner and the supplier.
Additional point for China-Related Cross-Border
Match Chinese and English contract versions, signatures or seals, purchase-order terms, invoice entity and payment recipient. If the brand owner, supplier, exporter and payee differ, document each entity’s authority and responsibility before escalating.
Financial exposure and response options
Work invoice by invoice: maturity, delivery, credits, payment and any documented quality set-off.
Settlement terms worth writing down
For this China-facing arrangement, write down how invoice maturity, credit note and shipment suspension will be handled. Set dates and responsibilities for payment or handover, and state what happens if an agreed step is missed.