How to spot a debtor struggling to pay

Monday 24th January 2022

Late payments can be a major headache for small businesses. Not only do they cause significant disruptions to cash flow, and potentially losses if they’re never resolved, they also require a fair amount of effort to chase, which further costs time, resources and money. James Burr, Head of Operations takes a look into some of the tell-tale signs that a debtor might be facing difficulty so that you can spot them early and avoid late payments.

4 signs a debtor is struggling to pay

  1. Stalling
  2. Longer payment terms
  3. Avoidance
  4. Reduction in credit limit

1. Stalling

Does the customer repeatedly ask for copy invoices even though you know you sent the originals? Or perhaps they dispute an invoice, requesting back-up paperwork before they will consider payment? In many cases these requests will be genuine however if a pattern begins to form or this becomes the norm with a particular debtor when all other debtors receive their invoices no problem with all of the supporting paperwork then it may indicate a bigger problem.

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2. Payments

When a customer who has always paid on time, starts to take longer to pay their invoices, you may start to wonder why. This is usually a solid indicator that the business is struggling to pay their bills. Other indicators might be that they start to part pay invoices or even ask you to put a payment plan in place.

3. Avoidance

Is the customer never available when you want to discuss payment of their invoices? Whoever undertakes your credit control will get a good sense of when someone is avoiding their call. Particularly noteworthy is when there is a sudden change in behaviour with no explanation.

4. Reduction in credit limit

Do you have credit protection against your debtors? Credit insurance agencies have access to a whole wealth of information from credit agencies but also payment performance data. All of this means that they will have the most up to date information on which to make decisions so if they decide to cancel or reduce cover on one of your debtors, there is a very good reason why.

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