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Is Your Customer Failing?

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Restart BTi’s Client Services team works closely with credit professionals to assist with the recovery of insolvent debts owed by their customers. Here’s some of the wisdom we can share to help you and your clients avoid the pain of a failed customer.

It can be difficult to know when a customer is failing. Useful information, such as company accounts and director resignations, is available from Companies House but there are other day-to-day signs to watch out for that can provide an early warning of potential trouble and therefore help to protect your own business from losses.

Reduced Communication

If you have always had an open and friendly relationship with a customer but suddenly find that your calls aren’t picked up or returned and emails get no reply, this could easily be an early sign of financial difficulty. Don’t wait too long to try to speak to an appropriate person about any unpaid bills.

Slower Payments

Has a customer begun to take much longer than usual to settle invoices, requested more time to pay, or tried to renegotiate terms of payment? These are all signs of a business in distress.

Invoice Disputes

Disputing an invoice, especially long after it fell due, may simply be your client grabbing some breathing space to pay. If you know some of your customer’s other suppliers, you might want to discretely check if they have had the same experience or if they have gone further, for instance putting the account on stop, or issuing a formal demand for payment.

Invoice Factoring

Invoice factoring can be a good option for businesses struggling to maintain cash flow. The factoring company takes over credit control function and, theoretically, collects debts more efficiently. It’s possible that the introduction of a factoring company indicates a weakened financial position and you might want to consider restricting sales on account.

Risk Spreading

In combination with poor communication and slow payment you might find that a customer in difficulty stops ordering from you, even though they’re clearly still operating. This may mean that they’ve obtained credit from a number of alternative suppliers to help spread their risk.

Senior Resignations and Low Morale

The resignation of senior staff is a worrying sign. Ask around and see if there is poor staff morale all round, and if the company concerned has a high turnover of staff. Your conversations with finance staff may offer a chance to discover discretely if the business is in trouble.

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