Are you a creditor or business owner that is consistently finding themselves with customers that can’t pay, but don’t know why they are not paying?
If so, you may be feeling quite frustrated and don’t know what you can do to change this.
After all, people can lie or hide from their debts and try to avoid telling you the real reason that they cannot or will not make payments.
This can be really damaging to your business as, depending on the reason they are not paying, you should go about collecting that payment differently.
If your client cannot make payments due to financial issues, legal action will be ineffective and will probably result in your client declaring bankruptcy or forming some other type of insolvency agreement.
This is why it is important to know whether or not this is the case so that you can recover your costs in a manner that suits the circumstances.
In this article our debt collection agency will discuss some general tips and tricks that you can use to identify customers that can’t pay due to financial troubles or insolvency.
Identify Customers that Can’t Pay with a Conversation
The first tip that you can use to figure out whether or not your client is not or will not pay their debts because of financial problems is to simply have a conversation with them.
Sometimes all it takes is reaching out and asking the question for it to be answered.
As much as this is quite an obvious tip, some creditors assume that they won’t get an answer or at least an honest one and just don’t bother reaching out.
Whether it be from past experiences or from things they’ve been told by others in the business, it isn’t great to think like this about our clients as you may miss out on some valuable knowledge.
It is, however, quite easy to assume that all debtors are the same and stereotypes about their unwillingness to pay their debts until they are practically forced to don’t help with the preconceived notions.
Just being that friendly creditor that is honestly looking for a conversation and someone that treats their clients like another human rather than just a debtor; you may like the results.
Identify Customers that Can’t Pay by Doing Due Diligence
Another great tip that you can use to assess if the reason that your client isn’t making payments is because of financial stress, by doing a due diligence check.
As a creditor, you need to know when your clients are not thriving financially, which will require you to put some checks and systems in place.
One of these systems may, and should, be a due diligence check. A due diligence check is an amazing but occasionally not utilised tool that creditors can use in many circumstances.
Someone’s due diligence report reflects a lot about them and their financial choices, which you can use to understand their past and present payment habits and such.
A bad due diligence report will sometimes suggest financial issues.
This can allow you to quickly identify issues in the financial health of a client, which can help you to predict payments that may be missed in the future or reasons for payments already missed.
Know your Prospective Client's Financial History
Another great tip that you can use to assess if the reason for your clients’ missed payments, or to predict future missed payments, is poor financial health is to understand their financial past and details before entering into an arrangement.
Although this tip may not directly help to identify the issue at the moment, having this knowledge ahead of time can, so you may wish to implement this strategy with new clients.
By allowing yourself the time to learn your client’s financial history, you open yourself up to a lot of opportunities to protect yourself and your business and make sure that you are managing their debts the best you can.
If their financial history reflects poor payment habits or cases of recent bankruptcy or insolvency, you can turn them down and avoid a potentially unpaying client.
Identify Customers that Can’t Pay Setting Appropriate Terms
Another great tip that you can use to assess if the reason that your client isn’t making payments is because of financial stress or not is to set appropriate payment terms.
Again, this tip won’t necessarily help you with a client that you are currently having an issue with, but implementing these strategies now can prevent you from having further issues in the future.
Having appropriate contract and invoice terms can help you to have a functioning business and a better financial relationship with your client.
In order to be properly paid for your services, you must have terms that suit both your business and your client basis.
This can ensure that your payment terms are being met.
Your terms should not be unreasonable or unfitting to your client basis or you will have trouble identifying the reason for non-payment.
If you have an oddly large number of unpaying clients, your terms may be the issue.
Having appropriate terms also includes them being known and understood by your clients, so make sure that you take the time to explain terms to clients.
Identify Customers that Can’t Pay by Showing Some Empathy
Another great tip that you can use to assess if the reason that your client isn’t making payments is because of financial stress or not is to show some empathy with your clients if they can’t make payments.
This tip is a little broader, but it can be just as effective!
If you have a client come to you and tell you that they are struggling with their finances and may not be able to pay as they agreed to in the past, try to show some understanding and consider negotiating with them.
This way, other clients may find out and feel more comfortable coming to you with their financial problems so that the issue can be solved.
Consider Using a Debt Collection Agency
Have you tried all that you can to discover the reason for clients not paying their debts, but have still been unable to figure it out and have the problem solved?
If so, it may be time for your business to try debt collection.
Debt collectors are professionals in the field of debt recovery and can use their wide access to tools and experiences to collect your debt successfully.
They can also help with matter-specific issues, like missing clients with methods such as skip tracing.
Try debt collection by submitting your debt online today!
Advance debt collection is an Australia-wide commercial debt collection agency and credit and accounts receivable management. We can recovery your debts, conduct skip tracing, and manage your accounts receivable. We collect your debts for commission only. This means no collection, no commission. We are professional debt collectors with combined 20 years of experience to help you collect your debts. We are partnered with expert litigation lawyers with years of experience in debt recovery, enforcement, and insolvency. Under the Agents Financial Administration Act 2014 Advance Debt Collection Pty Ltd hold authority number 4583821 to act as a debt collector. ADC Advance Debt Collection® is a registered trademark.