Customer Warning Signs

Customer Warning Signs

When managing accounts receivable, it's imporant to be aware of potential red flags that may indicate a customer is having financial difficulties or is unwilling to pay. Early detection of these warning signs can help you take proactive measures to protect your business.

Warning Signs You May Need to Employ a Collection Agency

Here's an expanded list of warning signs that you may need a collection agency for professional help collecting outstanding debts:

1. Returned Mail or Undeliverable Emails

You have mailed invoices, statements and/or correspondence and the mail has been returned. This may also include undeliverable emails.

  • Check if the customer has moved without informing you
  • Verify the address on file and cross-reference with other sources
  • Consider reaching out through alternative means (phone, social media, etc.)

2. Disconnected Phone Numbers

You have attempted to call the customer and the phone number is now not in service or temporarily disconnected.

  • Search for alternative contact numbers (cell phone, work phone)
  • Look up the company on business directories or social media for updated contact information
  • If it's a business, try contacting other departments or employees

3. Returned Cheques or Closed Bank Accounts

You have deposited a cheque which has been returned NSF, stopped or account closed.

  • This is a serious red flag that requires immediate attention
  • Consider requiring alternative payment methods in the future (e.g., wire transfer, credit card)
  • Review your credit terms with this customer

4. Numerous Broken Promises

You have been promised that they are going to pay over and over again, yet you have not seen any money towards the account. This is nothing more than a stall tactic!

  • Keep a log of all promises made and broken
  • Set firm deadlines and consequences for non-payment
  • Consider requiring partial payments or a formal payment plan

5. Lack of Communication

You have called, left messages, left voicemails, and emailed yet nobody is getting back to you. This is a clear sign that your customer is avoiding you, and the bill.

  • Establish a communication escalation process (e.g., contacting supervisors or executives)
  • Send a formal letter requesting contact by a specific date
  • Consider visiting the business location in person if appropriate

6. Waiting on Receivables Excuse

You have been told that they are waiting on a receivable to come in prior to issuing you payment. This in most cases is a stall tactic.

  • Request specific details about the expected receivable (amount, date, source)
  • Offer to set up a direct payment arrangement when the receivable comes in
  • Consider offering a small discount for immediate partial payment

7. Blaming Administrative Issues

You have been told that the invoice wasn't received, it didn't get entered into the accounting system, the cheque run just passed or the signing officer is away. These are red flags that you need to be aware of and be cautious about.

  • Offer to resend invoices in multiple formats (email, mail, fax)
  • Ask for a specific date when the next cheque run will occur
  • Request contact information for alternative signing officers

8. Claiming Financial Hardship

Playing the victim role. They continuously tell you that business is slow, no receivables are coming in, and that they are having cash flow issues, etc. You have provided them the service/product – time for them to pay up!

  • Express empathy but remain firm on the need for payment
  • Offer to discuss a structured payment plan
  • Consider requesting financial statements or proof of hardship

9. Sudden Disputes

Out of the blue you've now been told there is an issue with the service/product/invoice, etc. Sudden disputes are usually a smoke screen for a deeper issue and often nothing more than a stall tactic.

  • Address disputes promptly and thoroughly
  • Request specific details about the issue in writing
  • Offer to schedule a meeting to resolve any legitimate concerns

10. Gatekeeping

Every time you call a business you're being put through to voicemail or advised that the person you need to speak with is busy, away, on the phone, etc. Receptionists are often asked to be gatekeepers to avoid them having to deal with their creditors.

  • Try calling at different times or on different days
  • Ask for alternative contacts or decision-makers
  • Leave detailed messages explaining the urgency of the matter

11. Excessive Documentation Requests

The invoice is months old, you've mailed/emailed numerous invoices and statements, yet they continue to claim they haven't received it, lost it, or require another copy. Don't fall for their tactics, they're stalling!

  • Keep detailed records of all sent documentation
  • Use certified mail or email tracking for important documents
  • Offer to provide documentation in person or via a secure online portal

12. Vague Payment Promises

Often times customers will try and avoid the direct questions and simply state "it will be paid," "I'll pay it," or "I'll take care of it." These are all great promises, however failing to provide dates of when or how is another example of them avoiding the issue.

  • Always insist on specific payment dates and amounts
  • Follow up in writing to confirm verbal promises
  • Set clear consequences for failing to meet promised payment dates

If your account(s) is 60-90 days and you have checked off 3 or more of the above, it’s likely time to try a collection agency. NRC can help

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