As a business owner, you know better than anyone else that every time you send an invoice to a customer, you run the risk that the receivable will not be paid. This leads to risks to your company’s cash flow and profitability. One large unpaid invoice can cause your business’s growth to be in jeopardy or even bankruptcy. Defaults can also lead to liquidity problems, preventing your company from making desired investments.
Therefore, in this newsletter we would like to inform you about the signs that may indicate that your clients are in dire straits. When you recognize these signs, you can act on them and protect your business from the risks of debtors who don’t pay.
Signals that your customers may be in dire straits:
- Late payments: If your customer tries to change payment terms or no longer meets the payment agreement, it is likely that they have low cash flow.
- Questionable credit decisions: If your client made an abnormally large deal with a suspicious party, be wary. His problems may become your problems if he does not conduct proper credit management on this party.
- New financing: If your client keeps trying to get new financing or changes banks frequently, they may do so because their current bank is no longer extending credit. Be alert to this!
- Increased scrutiny: If your client is constantly under increased scrutiny from lenders, it could mean they are having trouble paying creditors.
- Excuses, excuses, excuses: Non-stop excuses from your customer as to why they are not paying can signal payment problems.
What can you do to assure yourself of bill payment?
When you follow all the steps correctly but no payment follows, it can have a huge impact on your business operations. One of the most common solutions to this is the use of credit insurance. With credit insurance, you have more assurance that your invoices will be paid. You are then not at risk if your customer goes bankrupt or files for suspension of payments. Your bills will then be paid by the insurer. The largest credit insurers in the Netherlands are Nexus Trade Credit, Atradius, Coface, Mercury, Allianz and Credendo.
It is also important to ensure a clear E2E (End to End) process that provides clear guidance for the accounts receivable department. This ensures that your accounts receivable management is structured and you comply with all the steps to minimize your risks. Find out how Kröller Capital can improve your accounts receivable management. Contact us today and let us help your business optimize your cash flow.