Most business owners, executives and salespeople simply don’t recognize the moment that an account they are selling to goes bad. When an account goes bad, there is usually a distinct possibility that the creditor – that’s you, if you are the business owner, may not get paid. To help our clients avoid collection problems before they occur, we developed a list of the Five Clues Your Customer is Not Going to Pay You. Any one of these behaviors individually, or in combination, should be a red flag that a rogue customer could suddenly impact your revenue stream.

Let’s face it, most business people don’t want to admit that there is a receivables problem, even when the clues are right there, staring them in the face. But if one or more of these scenarios occurs, it is time to act.

Five Clues a Customer is Not Going to Pay

While this list is not exhaustive, these have been the most common red flags they have identified when clients come to see us for assistance:

1.    Sudden drop in communications.

After having had a wonderful business and personal relationship for a long time with the customer making regular payments, the customer suddenly stops returning telephone calls and/or de-friends you on Facebook and unfollows/blocks you on Twitter.

2.    New dispute over old invoices.

When you approach your customer about overdue invoice(s), the customer now has quality issues with the product sold, the price charged and/or makes new claims of shortages.  If there has been no prior customer claim regarding of any of those issues, within a reasonable time after delivery of the goods or services, what does that indicate?  The answer is often an unwillingness or inability to pay.

3.    Broken promises of payment.

When a customer attempts to extend payment terms after the fact, it should be seen as a red flag. The customer patter often sounds like a promise of payment “next week,” “after a receivable clears” or “to coincide with the next shipment.”  Broken promises can also take the form of “I forgot to mail that” or “my Accounts Payable person was on vacation.”  A wary businessperson should see these empty promises of payment as nothing more than smoke screen to mask a cash crunch at the customer’s place of business. 

4.    The C.O.D. check has been dishonored.

Despite a Credit Hold because of non-payment of older invoices, the Credit Department might make the business decision to continue to sell to a delinquent customer. Arguably both parties need each other, badly.  In an effort to get a large client back on its feet with the prospect of future profit, the creditor might agree to new sales, but only on a “Cash On Delivery” basis.  If that C.O.D. check is dishonored, that should be the last sale to that customer.

5.    The phone is disconnected and mail is returned.

Although this might seem more like common sense than a clue, even when unable to establish any form of contact with the delinquent customer, it might not be too late to collect from them.  Businesses may close, but they don’t disappear that easily. 

One last thought. Don’t walk away from bad debt, try to collect on it. Sue in Small Claims Court if you don’t want to engage a professional to collect the debt for you.  You never know what might happen if you take affirmative action.

Elliott Portman is a creditor's rights attorney with Portman Law Group, P.C. who regularly engages in creditor’s rights law and debt collection matters.  Mr. Portman is Counsel to Rosenthal & Goldhaber, P.C. and can be reached at e.portman@PLG-NY.com or 631-979-8500.