Problem customers
- Warning signs: Look out for warning signs of customers that may be experiencing difficulties. Sometimes they are not easy to recognise. For example, while the sales team may want to claim credit for any increase in a customer's ordering, the new business the customer is giving you may be the result of other suppliers removing credit facilities. Industry gossip about a company's financial position is often surprisingly accurate.
- Commitment: It's important to get difficult debtors to admit they have problems in paying and to then obtain a firm commitment for an amount to be paid against the account. When possible, get this in writing, or write to them confirming their commitment.
- Stop supplies: If accounts are not being paid, supplies should be stopped. This should be part of your credit system. You can then discuss the situation with your customer, and perhaps reach an understanding regarding payment for past supplies and conditions for new supplies.
- Legal action: Don't put off sending professional demand letters or threatening legal action.
- Collection program: Discuss your policy and the credit limits you are applying up front so customers know you are serious about your collection program.
- Debt collectors: If necessary use a professional debt collector and be prepared to go to court.
Some business owners are concerned about taking such a disciplined approach to debt collection as they are afraid of upsetting and losing the customer. But if customers are not meeting their payment obligations, they're not worth having. You should be using your debtors to fund your own business, not your customers'.
* These tips were supplied by business and financial services firm,
HLB Mann Judd, Sydney.
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