Having a customer who is unable to pay can have a serious impact on your business. Knowing how to spot if any of your existing or potential customers are in financial trouble is imperative to protecting your position.
Being vigilant is important and you need to know what signs to look out for. Regularly check your client’s account as any of the following ‘red flags’ could indicate that your customer may be struggling financially:
- a change for the worse in payment patterns (taking longer than usual to pay invoices)
- the account remains outstanding for longer or the amount is greater than usual
- unexpected or sudden requests for a credit limit extension
- smaller or less frequent orders than usual
- mistakes on cheques (these could indicate that they are avoiding paying or buying more time)
- refusing to talk to you or are putting off paying you and are offering no reason
There may be a genuine reason for any one of the above but if these red flags start happening frequently, it might be worth you paying closer attention.
So what should you do?
If your customer appears to be “juggling debts”, you need to decide whether to:
- simply wait to see if they pay
- work to get yourself to the top of their pay list. Tell them how important this invoice is to you and to your business—it’s money you’re counting on
- apply pressure to see if this speeds up payment
- instruct solicitors to pursue the debt
Whilst the last one may seem harsh, if you are owed a significant sum, the loss of which would result in serious harm to your business, do you have a choice?
The very first thing you need to do is speak to them, face to face if possible. Financial stress is a very sensitive issue and the sooner you open up the lines of communication, the quicker the matter can be resolved.
CreditMan can put you in touch with a professional who can advise you on the best route to take.
Early Warning Signs for your Business
Recognising that your own business is in trouble can mean the difference between its death and survival.
Knowing what to look for is the first step on the road to recovery. Take a look at the list below:
- delayed or missed tax payments
- daily demands for payment
- bounced cheques, dishonour fees and delayed electronic authorisations
- bank overdraft at the limit
- tightened supplier credit terms
- threat of legal action
Any one of the above should set off an alarm bell that needs further investigation.
So what’s the next step?
Upon investigation, you find out that you may need some advice – what do you do now? Who do you talk to? You may not want to admit that your company is in trouble but you need to get good solid advice – and quickly.
CVR Global LLP are able to offer you free initial advice and help you decide on the best way forward for you and your business. They have a wealth of experience with offices covering the whole of the UK. They are there to help.