Your team has worked hard to deliver a professional product or service to the customer. It was delivered on time and meets all the conditions in your quotation, but the payment of the invoice has not followed. How do you know if a customer is unlikely to be able to pay you? How do you discover payments problems early?
Here are eight early warning signs that your customer might have a hard time paying the invoice.
1. Lack of communication
One of the first indications is when all communication with the customer stops. The customer does not respond to a payment reminder by e-mail or by letter and is unreachable by telephone.
Of course, it could be that an e-mail is lost in the mailbox, or that the customer is very busy. But if there is no break in the silence and the customer remains unreachable, alarm bells should start ringing.
2. The customer keeps apologising
It can happen that the client apologises for not making a payment on time. But if the same reasons keep coming up, you’ll have to dig deeper to find out what’s going on.
Here are four common excuses:
- The customer forgot to pay.
- The customer has financial problems, and your invoice is not a priority.
- The invoice is lost. The customer can no longer find it.
- The accounts department is too busy, not reachable or someone is away.
Tip! Check out some more excuses for late payments, and how to deal with them.
3. Changes to the customer’s purchasing policy
Your customer unexpectedly starts to buy less. This too can be a sign of ready cash drying up and payment problems.
4. Broken promises
If the customer has promised to pay but the payment has been delayed, it may be time to question whether this customer actually will pay.
5. Payment disputes drag on
Payment disputes occur as regularly as clockwork. This often arises over details in an invoice, or another complaint that has to do with the service or product provided.
If the customer refuses to pay the invoice, even after you have offered some solutions to the disputes, it is best to prepare yourself for the fact that the customer will not pay it.
6. The customer asks you to extend the payment term
When customers occasionally ask to put back a payment deadline, there’s no reason to panic just yet. But if the frequency of such requests increases, a number of flashing lights should start going off.
7. The payment pattern changes
When you notice that a customer’s historical payment behaviour suddenly changes – for example, they previously always paid well before the due date but no longer – this can be a warning sign. Maybe the customer has a (temporary) cash flow problem?
8. Your customer’s credit score changes
Companies that have a credit control team often use the credit score or external trade information to pre-screen a potential customer.
But even when you are already doing business with a customer, monitoring the credit score is important, especially when the first payment problems appear or the first doubts about payment arise.
Credit score tracking can be automated in the right credit management software. The same software will also notify you in the event of deviations from historical payment behaviour.
Recognise these payment problems with the right software
Based on these warning signs, you can get a better idea of when a customer will have difficulties meeting their payment. There is often still enough time to set things right and collect the payment. With the right software, such as iController, you can detect these signals early enough and take appropriate measures.
Interested? Get a free demo