Warning Signs of a Potential Credit Risk

Risk associated with your client’s ability to pay is a fact of life for businesses Australia wide. Initial and follow-up credit screening and precautions are an effective way to reduce this risk. Even so, it is impossible to avoid all risk.

There are however, common-sense tips that you can use to recognise when a client may be at risk of having their account falling overdue. Among these are –

 

  • New Management: This should prompt a red flag – is this move due to financial issues in the firm? Are there any other problems that may have arisen to cause the change?

  • Switching Banks: As you know, switching your banking can be a time consuming, and hard process. It is prudent to find out why a client may have changed bank accounts. This is especially relevant where the client starts settling their accounts with you with a credit card, or personal cheques.

  • Longer Repayment Periods: Has your client requested a longer period with which to pay their accounts? Ask what the cause is, this may be prudent even if the account is not overdue yet.

  • New Phone Number or Address: It is common that businesses grow and seek larger premises to operate from – this is the sign of a great client. What is not so great is when your client down-sizes. This may be due to smaller operations, or the inability to keep the lease at previous premises. This should raise a red flag, and prompt further investigation.

  • Demeanour: Has your client gone from a happy, well-to-do workplace, to one filled with grim faces and left dishevelled? This may be a useful insight in to the financial situation of a business and their ability to pay current and future accounts.

  • Disputes: Is your client all of a sudden complaining about the goods provided or services rendered? Find out whether it is a real problem causing these complaints, or whether there is an ulterior motive at play. Clients have a higher propensity to complain when facing financial problems, this should serve as a prompt to further investigation.


 

There are many other things to look out for. Recovering debts day-in day-out hones an eye for these otherwise discreet warning signs that may lead to pre-emptive action, and the avoidance of non-payment, thereby reducing risk and promoting your bottom line. Engage a reputable debt collection firm for the peace of mind you need to move forward with confidence.

2017-01-04T17:52:24+00:00