Is it possible to spot a late payment before it happens? I certainly think so.
And, with small to medium-sized businesses owed £14bn in late payments, these early indicators could enable you to spot the problem before it occurs and help to protect your cash flow.
So, here are 15 signs that could suggest that your customer might struggle to make a payment on time. Whilst one of them on their own might not be a good enough indicator of your customer’s inability to pay, a combination of these warning signs should start ringing alarm bells.
1. Broken promises
If a customer repeatedly breaks promises to you, such as not making contact when they say they will or returning documents when agreed, it’s unlikely that they’ll pay on time either. So, put them on a watch list and ensure you follow up at regular intervals to encourage prompt payment.
2. Unreturned phone calls
As part of your standard credit control process you should be putting in multiple courtesy calls to confirm receipt of invoices and check your customers’ intentions to pay. If these calls go unanswered or you’ve left multiple messages without reply, it could be a sign that your customer is avoiding you and may not make payment on time.
3. Sudden changes in buying patterns
If your customer suddenly changes how much they are purchasing from you it could be a sign that they are experiencing cash flow difficulties. If this is the case, they may not be able to make payment on time.
4. Change in behaviour
Likewise, any sudden changes to behaviour in general could signal cash flow challenges. So, always get to know your customers and their normal behaviours so that you are able to spot any differences. This can range from the tone of their emails to their telephone manner.
5. Management resignations
If some top-level executives have resigned it could be a sign that the company isn’t performing well, especially if it’s over a relatively short period of time.
6. Sudden stock/asset sales
When a company suddenly sells its assets or offers stock at low sale prices, this could be an indicator of cash flow issues. They may be trying to minimise outgoings or bring in extra money to pay their bills. As a result your invoice may not be high on their priority list.
7. Reduced service levels
If a company which usually offers high-quality service is suddenly struggling to offer the same high standard, it could be an indicator that something isn’t right.
8. Rapid business expansion
Whilst rapid expansion can also be a positive sign, it is sometimes the case that companies which overtrade can suffer cash flow difficulties if the business does not have the adequate resource to meet increased demand.
9. High turnover of staff
When a business’s staff is constantly changing, it can be worth considering what the reason for this is. Could it be because their staff are trying to escape an unpleasant work environment or maybe they’re seeking job security elsewhere.
10. Late filing of accounts
You can learn a lot about your customers from their filed accounts. The information reported can give you an insight into their financial health. Also, late filings could indicate that they’re struggling.
11. CCJs
Take a look at credit reports and the Register of County Court Judgments (CCJs) to discover if your customer has any CCJs against them. Companies which do obviously have a history of not making payments and may continue to do the same now.
12. Bad credit rating
Likewise, credit reports also provide valuable insight into the financial status of your customers. Whilst you should check this at the start of your business relationship, make sure that it is an ongoing process so that you don’t miss any sudden changes.
13. No accounts payable department
Some smaller businesses might not have the need for an accounts payable department so this isn’t an automatic red flag. But be aware that if a single person is taking responsibility for a number of different jobs, paying bills may not be their top priority.
14. Disorganised customer
Have you noticed that a customer seems flaky or indecisive? Whilst this can be frustrating it can also be a warning sign. Can you trust that they will pay when they seem disorganised in every other aspect of business?
15. Gut feeling!
There’s a lot to be said for gut feeling. Sometimes you just know. If you suspect that a customer might not be able to make payment then at the very least you should proceed with caution.

Alex Hilton-Baird, Managing Director, Hilton-Baird Collection Services