Understanding the buying & payment patterns of your customers is key to detecting when there could be in impending problem. We asked Credit Manager, Leigh Garth to share some of her experience.
Monitoring payment patterns. All of a sudden, the customer is getting later with their payments, however I am mindful of seasonal factors. I check patterns in prior years, matching the same period to ensure it is only temporary slow payment – (contact and put in a diary note for follow up)
Have they changed method of payment? For example, from a Direct Debit to Electronic Funds Transfer and then even payment by cheque in the post. Look out for the credit card to pay for credit over the phone.
Making a payment in round figures, i.e. the $500 payment not paying specific invoices, just reducing the balance. And those dishonoured payments!!
Has the customer told you they are refinancing or changing banks? This is a regular reason/excuse for non-payment.
Disputing one invoice but holding payment for all other invoices in the dispute.
Continually asking for copies and/or Proof of debt
High staff turnover can be an indicator of some trouble in the administration area, not just cashflow but also the culture of the debtor business.
Most of all, the biggest INDICATOR is when a customer/debtor stops talking to me, despite a previous strong relationship, becomes unavailable and doesn’t return phone messages. Add to this, bouncing emails, phone number not available, message bank full and the writing is ON THE WALL!