No doubt every single business owner in the United States has, at one time or another, experienced problems with nonpaying clients, and the worrying statistics show that once an invoice is delinquent, the possibility of collecting successfully on the debt decreases by more than 1 percent every week that the debt remains unpaid. Once the invoice is 90 days overdue, you have less than a 70 percent chance of collection, and this drops to almost half once the invoice is six months overdue. It seems clear that rapid action is necessary and taking steps, such as putting in place a B2B online payment processor, could improve the situation.
The key to resolving nonpayment issues is to look for the red flags that indicate a client could be in trouble before a company even misses a payment. Here are some top things to look for that can indicate future payment problems.
Red Flag Signs
- The company is changing locations. It’s expensive to move, so you need to look at the reasons behind it. Is it a smaller location? If so, that could indicate financial problems resulting in downsizing. If it’s a bigger location, that could be a good sign. However, financing expansion is often at the expense of payments to companies that the company deals with.
- The company is laying off workers. The cause of this is usually financial problems. You may notice that an employee you usually deal with has disappeared, and this could be a sign that he or she has moved on to a more reliable workplace before the company goes out of business.
- The business is being sold. Usually, a business is only sold when financial difficulties are being experienced. When the company is sold, collecting on overdue invoices becomes harder than ever.
- Personal problems. If your client is running a small business, personal problems, such as marital difficulties or an illness, could end up taking priority over overdue invoices.
- Excuses. When the client makes excuses, such as “We can’t find the invoice,” “The invoice isn’t approved yet,” “The person responsible for signing checks isn’t in the office at the moment,” this could be a subtle indicator that all isn’t right at the client’s end.
What to Do When You Spot A Red Flag?
If you recognize any of these signs from one of your customers, it’s time to get some answers. Call the client and find out more about the situation, and whenever possible, speak to several people there so you can determine the consistency of the story. If possible, go to the client’s premises and find out the extent of the problem.
Whatever happens, if you suspect that there is a red-flag situation with one of your clients, you need to take some aggressive action, or you won’t receive a payment in a timely manner, or, perhaps, at all. Give the account extra attention and avoid waiting around to see what happens.
How to Improve Chances of Payment
One of the best ways to improve the chance of being paid by clients is to put in place a B2B online payment processor that makes the process of paying for goods and services a lot simpler and more convenient. An online payment portal that accepts numerous payment methods can make the difference between receiving payments on time and having to chase after nonpaying customers. Also, putting in place the facility to take payments over the telephone during collections telephone conversations will also help to improve cash flow with real-time authorizations that don’t rely on waiting for the client to write a check.