6 Urgent Signals That a Customer Won’t Pay Your Bill (and What to Do About It)

• September 29^th, 2021
• Community

If you’ve been in business any length of time, you know the sickening feeling.

Staring at a list of overdue accounts receivable, and knowing one or more has decided not to pay — ever.

It puts you in an undesirable position. You’ve worked hard for every customer and every piece of business you’ve taken on. From marketing to prospecting and sales, to fulfilling the product. You’re out piles of much-needed money if things go the way they seem to be headed.

The only thing worse than a new customer ignoring your bill is when a once-reliable account suddenly stops paying — out of the blue.

Or so you may think. Customers seldom start paying without a single warning sign.

There are always red flags that signal an account may be in trouble, but you need to know what to look for.

Here are 8 telltale signs that you should be following up an account to ensure the bill is paid:

1. A slowdown in the economy. Every business case is impacted by a different set of factors. A major change in the price of certain commodities creates a ripple effect that can force shutdowns in directly related industries — and bankrupt hundreds of suppliers downstream. Oil and gas, lumber, and other markets probably affect several of your customers directly or indirectly. When you hear about business closures, see if any dots connect to the businesses who buy from you, and pay extra attention to those accounts.
2. A change in payment habits. When your best-paying customer is suddenly a week or more behind the norm, place a call to see what has changed. Often you can identify the root cause in a casual conversation, and perhaps it’s as simple as the usual Accounts Payable person being on vacation. If it’s a bigger issue, be extra diligent to remain a payment priority for this customer.
3. Radio silence. If a normally responsive customer has stopped answering emails or phone calls, something is probably up. It could be a vacation, illness, or disruption like illness or a death in the family — but even in such cases, it is common courtesy to respond to suppliers within a reasonable amount of time. Dig deeper, and pay an in-person visit if other methods fail, but don’t wait: your statistical likelihood of being paid diminishes with every passing day. If your escalated efforts turn up more dead ends, send the file to your collection away. Our agents are experts at tracking debtors out of hiding, and we work quickly.
4. The customer is shedding staff. If you’ve begun seeing resumes from former employees of a customer, it could mean the business is in trouble. Find out if any downsizing is related to bigger issues, and if so, re-evaluate the amount of credit you advance to the customer. Be respectful of your own risk tolerance, and don’t exceed it. Freeze any account that can’t adhere to its payment terms, and send outstanding amounts to collections.
5. Two weeks never comes. If every time you follow up, the customer claims to be expecting a big receivable “in about two weeks” that will enable payment of your account, it’s a common stall tactic—and a sign of trouble. When the first promise goes unmet, remind the debtor that your payment terms were clear from the very beginning and that you’ve got a firm policy of sending accounts to a credit-reporting collection agency at a specific number of days past due. That’s not being mean: unlike failing to pay bills as promised, it is good business.
6. Credit alerts. If you really want to be proactive (or can’t afford to not be paid on large orders), subscribe to a credit monitoring service to be notified if any of your customer accounts are at risk of going into default.

Don’t let stall tactics prevent you from getting paid. It’s up to the customer to honour the agreed-upon payment terms and find a way to resolve the account. When that doesn’t happen as promised, your credibility depends on how you take action. The customer’s ability to find the money is often dependent on the priority level given to your invoice, and the way to raise priority is through consequences.

When you warn that your policy is to send files to a credit-reporting collection agency after a specific number of days (we recommend 60 days past due), it says to the customer that non-payment will impact their future ability to obtain credit. If that isn’t motivating, it means the customer doesn’t expect to be in business much longer!

Avoiding bad debt requires planning and process. Before granting credit (which means any time you are not paid upfront), require customers to complete a credit application. There is nothing wrong with requiring existing accounts to complete an application when you update your policies. Pull a credit report on all customers, and look for accounts in collections, judgments, fraud accounts, or write-offs.

Finally, have a relationship with a collection agency that reports to major credit bureaus to ensure you can collect quickly when anything goes wrong. You don’t need to wait until you have accounts in arrears. We remind business leaders to Know Us, For When You Need Us™ to be comfortable and ready to go whenever the need arises. There’s never any risk because fees are deducted from the balance and don’t apply unless we collect on your behalf. (Plus for Chamber members, we offer our lowest available rate!)

It’s not a matter of luck that some B2B businesses have few or no bad debt write-offs. It’s a combination of smart planning, consistent practices — and strong business partnerships. Be vigilant and proactive, and you’re sure to see real improvements to your bottom line.

 

Author:

Brian Summerfelt

President and CEO of MetCredit, Canada’s top-performing consumer and commercial collection agency