Red Flags for Bad Customers

In an ideal world, all customers would pay their bills on time or early, allowing businesses in turn to pay their bills on time, and so on up the chain. In reality however, many customers will pay late, or even not pay at all, which leads to all sorts of problems down the line. And it affects us all. One late or non-payment at the top of the chain trickles down, with the businesses not able to pay their own bills while they’re waiting for customers to pay, which means they’re causing issues for their own suppliers. And so on and so on. Wouldn’t it be great if we had a way of spotting customers who are going to be bad payers ahead of time, so that we could avoid working with them, or at least demand payment in advance?

Sadly, there’s no magical tool to do this for us. But what we can do is learn the warning signs often given off by late paying customers, so that we can take action at that point. In our experience, most bad payers will exhibit some sign that they aren’t going to pay you before it happens, so let’s look at what they could be.

They Quibbled Over Price

A little negotiation isn’t a bad thing, and is often a common part of doing business. But most business owners will understand the limits, and either take the price you offer or walk away. If a client gets to the stage of quibbling aggressively about pricing, then it’s usually a sign that they can’t really afford to pay for the product or service.

Red Flags to Watch For:

  • Constant back and forth on pricing.
  • Expressing negativity about your pricing.
  • Asking for discounts or special offers.

Bad Communication

Communication is the foundation of any business relationship, and it needs to go two ways. If a client is good at communicating and getting back to you, then this is usually a good sign. But if communication with a client becomes vague or sporadic, then it’s time to pay attention. If a client who used to respond promptly suddenly starts taking days or weeks to reply to emails or calls, then you need to start preparing for the worst.

Red Flags to Watch For:

  • Not answering calls or emails about invoice queries.
  • Vague or non-committal responses when asked about payment.
  • Avoiding direct payment conversations, or giving constant excuses.
  • Being quick to demand your attention and time, but ignoring or dodging your calls about invoices.

If a client is dodging communication, especially around payment discussions, then this could be an early sign that they’re either unable or unwilling to pay.

Always Asking for Extensions

It’s not unheard of for clients to ask for a bit more time to pay. And if they’re usually good payers and are upfront with you about it, or request a payment plan, then that’s not a red flag. But it becomes a red flag when they do it all the time, or delays payments for as long as possible every time. This becomes a pattern, and not one you want to see repeated.

Red Flags to Watch For:

  • Constant requests for additional time to pay, without valid reasons.
  • Promises of payment that never materialise.
  • Excuses about cash flow, bank issues or delayed payments from their own customers.

So if a client is regularly asking to postpone payments with excuses, it’s a sign they may be struggling financially and need support, or that they just don’t prioritise paying you on time.

Refusing to Pay Up Front

The next thing to look out for is a client who won’t even entertain the idea of paying up front.

Now, this isn’t always a red flag. For example, a lot of government organisations only pay after getting deliverables, and they might also take 30 days to pay you. This is usually something that will be discussed up front, and you’ll need to decide whether or not that’s a deal breaker for you.

But for normal businesses, payment up front is a fairly normal business practice, and one they should be used to. Especially if they’re a new client working with you for the first time, or if they have a history of non-payment. If either of those are true and they are refusing to pay up front, then it’s a big red flag.

Financial Instability

A client’s financial health is a key indicator of whether they’ll be able to pay you on time. If you notice obvious signs of financial distress – like redundancies, restructuring or a sudden reduction in their spending – then it could mean trouble is on the horizon.

Red Flags to Watch For:

  • Reports of planned redundancies, restructuring or downsizing in the business.
  • Rumours of financial difficulties in the industry.
  • Frequent staff turnover in their account payable or finance department.

If you want to stay ahead of this particular issue, then it’s wise to carry out some form of monitoring, checks or assessments. This could be anything from a credit to check to a company monitoring, or a full company health assessment. At Debtcol we offer all of these services to help businesses like yours.

Changing Buying Behaviours

Most of the time you should be able to roughly predict the buying patterns of your customers, especially if they have been with you a long time. So if there are any changes in their buying behaviour, like a sudden reduction in their order size or frequency, then it’s worth investigating. Sometimes it’s nothing, but in others it can indicate bigger financial problems.

Red Flags to Watch For:

  • Sudden reduction in order size without explaining why.
  • Irregular or sporadic buying patterns.
  • Hesitancy to place new orders or delays in placing orders they had previously promised.

Identifying these red flags early can save your business from the stress and financial strain of unpaid invoices. By staying vigilant and taking proactive steps to manage risk, you can protect your cash flow and ensure your business continues to thrive.

If you’re dealing with customers who aren’t paying on time, or if you’ve spotted any of these red flags, don’t wait—reach out to us at Debtcol. Our team of professionals can help recover your overdue payments quickly and efficiently, allowing you to focus on growing your business.

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