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Five Clues That Your Customer Is Not Going To Pay You

Originally published: May 2014
By Elliott Portman, Partner at Roe Taroff Taitz & Portman, LLP

Most business people don’t recognize the moment that an account they are selling to goes bad.  Frankly, most business people don’t know what to look for, even when the clues are right there, staring them in the face.  The following list isn’t meant to be the only red flags to watch for, just some of the most common ones:

1. Suddenly, no communication from your customer.

After having had a wonderful business and personal relationship for a long time, with the customer regularly paying you, find the customer suddenly stops returning telephone calls and/or de-friends you on Facebook/Twitter/LinkedIn.

2.  The new dispute on old invoices.

When you approach your customer on the overdue invoice(s), the customer now has quality issues with the product sold, the price charged and/or makes new claims of shortages.  If there has been no claim of any of those made by the customer within a reasonable time after delivery, what does that indicate?  The answer is; an unwillingness or inability to pay.

3. Broken promises of payment.

Often the creditor will approach the customer to discuss the issues of non-payment.  One of the ways the customer can further extend terms is to promise payment “next week”, “after a receivable clears” or a “payment to coincide with the next shipment.”  Broken promises can also take the form of “I forgot to mail that” or “my Accounts Payable person is/was on vacation”.  A wary businessman will look at these empty promises of payment as nothing more than smoke screen to mask a cash crunch at the customer’s place of business.

4.  The C.O.D. check has been dishonored.

Despite a Credit Hold because of non-payment of older invoices, the Credit Department might make the business decision to continue to sell to the delinquent customer.  Arguably the parties need each other, badly.  In an effort to get a large client back on its feet with the prospect of future profit, the creditor might agree to new sales, but only on a C.O.D. basis. If that C.O.D. check bounces, that should be the last business the parties do, ever.

5.  The phone is disconnected and mail is returned.

Although this might seem more like common sense than a clue, even if you are unable to establish any form of contact with the delinquent customer, it might not be too late to collect from them.  Businesses might close but they don’t disappear that easily.  Don’t walk away from bad debt, try to collect on it.  Enlist a professional collection agency to collect the debt for you. Or engage a law firm that specializes in commercial law and collection-related services for an amicable resolution or to pursue litigation, if necessary.  You never know what might happen if you take affirmative action.