Simple Tips to Avoid Delinquent Payers

The Kaplan Group

As we’ve explained many times in our previous posts, delinquent and non-paying customers and accounts can have a very serious effect on the health of your business. Obviously, when a customer orders a product or service and then doesn’t pay for it, your business suffers – so how can these delinquencies be avoided? Today’s blog post will give a handful of simple steps that can be taken to avoid a surprisingly large amount of delinquent payments – and the best part is, you can start implementing them today.

  1. The most simple and seemingly-obvious measure a sales representative can take to help avoid late or non-payment is to clearly and specifically explain the payment commitment the customer is entering into with your business. By ensuring your customer fully understands the terms of the sale, you can be certain that they know when payment is due. While a fraudulent customer will still likely miss the payment date, at the very least by ensuring that they understand the terms, you eliminate a potential stall in any future collection effort. The customer will not be able to claim that they didn’t understand when/how payment was expected and you’ll be able to get the situation resolved more quickly.
  2. Monitor the payment patterns of your regular customers. If a longstanding customer that has always paid promptly and in full begins to make late payments, this could be a sign of a management/ownership change or a variety of other situations that will have an effect on the business relationship between your business and the customer. If you see red flags in your monitoring, it is important to find out what’s changed and why the customer is behaving differently before further credit is extended to them. This can be very helpful in avoiding business fraud in which a new owner takes advantage of their business’s established reputation to defraud companies before they’ve noticed the management change.
  3. When possible, avoid entering into payment plan agreements with customers. While not all customers have the resources available to pay for a large order in full, it is clearly beneficial to your company to receive full payments whenever possible. Entering into a payment agreement opens the door for late payments and, even if the customer makes their payments on time, the potential for a long and drawn-out payment plan usually results in an overall lower return on your sale.
  4. Don’t hesitate to put a hold on future orders if an account becomes delinquent. Oftentimes, a business will continue to send products to a customer who has, in the past, maintained a good payment record even if their account becomes overdue in an attempt to maintain the business relationship, but doing so puts your business at a greater risk of losses if the customer doesn’t rectify their account. Furthermore, putting a hold on their future orders applies extra pressure to the customer to pay their bills, especially if they are reliant on your company’s product for their business operations. Once the situation has been cleared up, you can remove the hold on their account and the business relationship can continue as normal, but if the unpaid bills are never taken care of your company will obviously be better off if more products aren’t sent to them.
  5. The very best way to avoid delinquent accounts is to perform a thorough credit check before doing
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    business with any new customer. While a new customer placing a relatively small order may not warrant a full credit investigation, it is still important to perform at least a basic credit check before extending any credit to a new client. We have posted an extensive set of articles explaining credit analysis and why it can be so helpful in avoiding delinquent and non-paying customers, which can be found here.

By following these strategies, the number of delinquent accounts your company encounters can be greatly minimized. As a result, your business’s cash flow can be greatly improved, the turnaround time between shipment of orders and receipt of payment can be minimized, and the number of accounts that ultimately have to be turned over to debt collection or to the credit department can be greatly decreased.


About The Author:

Dean Kaplan is Principal at The Kaplan Group. Dean's exper­tise is widely rec­og­nized in the debt col­lec­tion indus­try. His advice has been pub­lished in a num­ber of indus­try newslet­ters such as Credit Today and InsideARM and he is a fre­quent speaker at indus­try events.