Five signs that a customer may be in financial trouble

Five signs that a customer may be in financial trouble

Summer is almost over, for many traders this is often accompanied by a sigh of relief, because the well-known “Sommerloch” causes a dip in turnover and often also payments. So everyone gets back to work in September full of courage, because holidays are over, schools start again and when people are at home, a flower or plant is bought more quickly. However, some caution is required.

Your customer is guaranteed to come with larger orders, but has no money, because he too paid less in the summer. You just have to understand that and everything will be fine again soon. Is that true? Very simply put: the extension of a payment term by 1 week takes exactly 1 week. In practice, catching up on 1 week of payment arrears often takes 4 - 8 weeks! And then everything has to go well. The reality is that many companies are starting to suffer from the current economic situation in many EU countries. It is not positive. And then there are also a number of companies that have to repay old Covid debts. Still.

Take your loss in time or talk to your customer about how to continue. If you don't, you will ultimately be the loser, because you are the financier.

What signals should you pay attention to:

- Payment term is increasing:
Look at the agreed term, the payment term 6 months ago and the one today. Then you have a trend and if it really deviates more than 14 - 21 days, get to work with your customer and start by ensuring that it does not increase any further.

- The customer no longer pays invoices, but only cash payments:
That is also a signal that the boss is taking over from the accounting department and thinks that he has a better grip on the matter. The bank is often on the phone every week and the boss has to compromise with the various suppliers and the credit limit at the bank. He skips a week and then suddenly pays a bit more the following week and tells his supplier that he pays more than he took (in that week), but ultimately runs out. Don't let yourself be blackmailed by the story that he has to order somewhere else!

- The accountant is on holiday:
Also a lame excuse, but still used a lot. We come across them all year round, also in debt collection procedures.

- The annual figures are not good:
Every company, if it is a Limited company, must file figures with the Chamber of Commerce every year, also in the entire EU. These are brief for small companies, but they do send out a signal. The credit rating agencies and insurers pay close attention to this and attach a score and/or limit to it. AgroCheck does this too. It doesn't cost that much and can save you a lot of trouble.

- There is trouble at your customer:
This could be, for example, that there are sudden changes in management positions, dismissals, reorganizations and so on. This creates a lot of uncertainty within a company and always comes at the expense of results.

There are of course many more possible signals, but with the above 5 you can quickly determine whether it is not wise to re-examine the relationship, no matter how long it has been. Enter into a conversation and take action, if you don't, you are usually the big loser.

Of course we can also do that for you. Feel free to have us examine your customer base. That will ultimately help you sleep better.
Check your customers in the online database of AgroCheck or request an up-to-date credit report by sending an email to info@agrocheck.com.