If you’ve been in business any length of time, you know the sickening feeling. Staring at a list of overdue accounts receivable, 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, and there are red flags that may signal an account could be in trouble.
Here are three things to consider when following up with your customer:
1. A change in payment habits
When your best-paying customer's account is overdue, it’s worth a 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, extra communication may be needed for you to remain a payment priority. One way to raise the priority of your invoice is by clearly reiterating the consequences of non-payment to your customer. If your policy is to send files to a credit-reporting collection agency after a specific number of days (we recommend 60 days past due), you can remind the customer that non-payment may impact their future ability to obtain credit.
2. Radio silence
If a customer stops answering emails or phone calls, something is wrong — it could be a change in contact information or staff, a vacation, or a sudden illness. But it’s not wrong for you to expect that your customers respond to payment inquiries within a reasonable amount of time. Don’t wait to dig deeper and communicate the urgency of the issue. If your escalated efforts continue to turn up dead ends, it may be time to send the file to collections.
3. Two weeks never comes
Your customer says they are expecting a big receivable “in about two weeks” that will enable payment of your account. This could be a stall tactic. Remind them of your payment terms and your policy of sending accounts to a credit-reporting collection agency at a specific number of days past due. It’s up to the customer to honour the agreed-upon payment terms and find a way to resolve the account.
Avoiding bad debt requires planning and process. Before granting credit (any time you are not paid upfront) by a customer, you can ask them to complete a credit application. You can also ask existing accounts to complete an application when you update your policies. If you do pull a credit report on customers, look for accounts in collections, judgments, fraud accounts, or write-offs.
Having a relationship with a collection agency that reports to major credit bureaus ensures your ability to collect quickly if anything goes wrong. You don’t need to wait until you have accounts in arrears. 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.
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