How Do I Know That My Customer Is Having Financial Problems?

In times of recession we are all trying to survive and sometimes the worst thing that can happen to your business is that one of your customers is in trouble.  If they go down, your business could be the next in line.  So how do you know when one of your customers is having problems?

The first and most obvious one is that they have not paid your latest invoices.  This is a rather drastic way to find out so look for these clues to their having financial problems:

·         They pay later than usual.

·         They order more goods than normal.

·         They ask for extended credit terms or increased credit.

·         They ask for a change in the credit terms that seem a little unusual.

·         They send an order outside of the credit terms.

·         They make a sudden surge in their advertising and/or increase the pressure on their sales staff.

·         Their sales staff seem very stressed from being pressurised into finding new customers or having too few staff available.

·         They make key staff redundant.

·         They change their trading hours – more means they are chasing sales, less means they are cutting costs.

·         They restrict their product line.

·         They do not order goods from you in their less popular ranges.

·         The hold a lot of sales.

·         Industry gossip indicates problems.

·         They become the takeover target of predatory companies.

·         Their accounts group becomes difficult to contact.

·         They do not return phone calls.

·         Their support line is unusually busy with complaints or quiet from lack of business.

·         Their cheques are returned unpaid.

·         There appears to be a lot of meetings of their top staff.

·         A manager, more senior than you usually deal with, asks for a meeting to discuss trading matters.

If you see one or more of the above then you need to seriously review the credit that you extend this company.  You should also consider meeting with one of their senior managers to discuss matters.  It may be that you can assist them or barter some of their good for assistance within your company.