Creditors’ Rights 2
Q: Are there early warning signs a creditor can look out for that indicate a customer may have trouble paying?
A: There are reoccurring issues that seem to affect small, closely-held companies when it comes to paying on time. Death or illness of a principal is perhaps the most crucial. Seasonal businesses can also be a concern. For example, a company that sells Hanukkah or Christmas items may have trouble paying during the summer months. Or, a company that does construction work or sells pools or summer recreational items may experience a cash crunch during the winter.
Also look out for a sudden change in payment history-if you work with a company that always pays within 15 days net, and then suddenly moves to 45 days net, that may be a red flag. The bottom line is that you must stay proactive, stay in contact, and don’t be afraid to get on the phone with a customer and find out what is going on. Early intervention is key.
