3 Warning Signs That a Customer Won’t Pay Your Bill

This article was originally posted by MetCredit

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. The only thing worse than a new customer ignoring your bill is when a once-reliable account suddenly stops paying — out of the blue. Customers seldom stop paying without a single warning sign.

There are always red flags that signal an account may be in trouble.
Here are 3 telltale signs that you should be following up:

1. A change in payment habits. When your best-paying customer's account is overdue, call to see what has changed. It could be 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.
2. Radio silence. If a customer has stopped answering emails or phone calls, something is wrong. It could be a vacation or illness, but it is common courtesy to respond within a reasonable amount of time. Dig deeper, 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 collections straight away.
3. Two weeks never comes. If 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. Remind them of your payment terms 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: it is good business.

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. Require 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. At MetCredit, we remind business leaders to Know Us, For When You Need Us™ so they've got a plan in place whenever the need arises.

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