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Transcript
DEALING WITH DEBTORS – CUSTOMERS WHO OWE YOU MONEY:
When a business ceases trading, it is not just the business that closes that is a casualty but anybody they may have owed money to.
Because of the recession, people going out of business has became much more commonplace than before, so you owe it to yourself to be vigilant and not ignore red flags that could be a sign of payment issues to come.
Some of these are:
1. Constantly paying invoices late.
While this could just be a symptom of the administration routine at your customers end, e.g. local authorities are known for long payment periods so if you do business with them it is something you knowingly take into consideration.
If the late payment is not for an obvious reason, and you are confident there is no dispute with what you supplied, then it could be, though by no means definite, that your customer is juggling bills to fit with tight cashflow.
2. They rarely pay your bills in full, making regular part payments on account.
3. Though not so common, but relevant, they send post dated cheques.
4. They send a remittance advice advising of payment online but the money does not appear until sometime later. Definitely not on or around the date of the remittance
5. Paying your old invoices only when they need to place another order with you.
6. Regularly disputing invoices and wanting refunds. This could be a sign your goods or services need improving, but if you are confident that is not the case, be wary.
7. When chasing them for payment, never being able to speak to the person who is responsible for paying you, colleagues reassure they have passed on your messages and you will be called back, but you never are.
8. One that is not so obvious but one that I have witnessed occurs when a new customer places a larger than usual order for a first time, often needing a quick turnaround.
I experienced this the first time in a company I worked with many moons ago and on further investigation (it was a very incestuous industry), I learned the potential client had fallen out with 2 previous suppliers due to late and non-payment and was struggling to fulfil their orders.
I had no intention of being the next in line so insisted on payment in advance. It is instances like that where credit checking and references can be very useful. But that is something to consider when setting up your credit control policy and procedures in the first place.
Credit control policy & procedures!
I will save that for another time.
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