It’s never ideal when clients start showing signs of financial distress. We have to ultimately decipher if their difficulty is merely temporary or if bankruptcy could be on the horizon before we know it. Here are some tips for distinguishing and preparing a response for either scenario.
Spotting the Signs of Approaching Bankruptcy
There are a lot of potential signs that your clients might be in the midst of financial trouble. The first giveaway will be a shift in payment patterns compared to their normal tendencies. Perhaps they are taking longer than usual to pay their invoices? Maybe you’ve noticed them switching up their payment method often? Even unusually large or small orders can signify that something troublesome is going on. If you begin noticing any of these tendencies, it’s a good idea to start doing a little more digging into the situation.
You can start by checking if the client is in the midst of significant personnel changes. When key contributors leave or layoffs start restructuring the business, you can begin to assume they may be bracing for the worst.
Auditing Your Relationship
It would help to be sure you’re making informed decisions when dealing with businesses experiencing financial hardship. Thus, if you suspect one of your clients is experiencing turmoil, your goal should be to decide if you want to be part of their recovery. Many businesses on the brink of bankruptcy find a way to pull through and recover, which is ultimately the best-case scenario for all players involved!
You can start your audit by speaking to your client about their recovery plans. Are they able to explain what brought them to this situation and how they intend to navigate through it? If they present a sound strategy and have been a key partner of yours in the past, it may be worth sticking with them through their period of difficulty. Don’t just take their word for it, however! Do research of your own by speaking with their suppliers, if possible, to gauge their confidence in the organization. Be sure to avoid revealing any confidential customer information while doing so!
Making a Deal VS Making Exceptions
You’ll ultimately have some tough calls to make when one of your clients is on the brink of filing for bankruptcy or closing its doors altogether. If you have faith in their recovery plan, you can opt to make exceptions for them by backing up the payment date and adding interest and fees the longer the bill is unpaid. Be sure to consider that going this route is a bit of a risk. If you wait too long, you may end up missing the window of time in which you can receive full compensation.
If bankruptcy is starting to feel inevitable, you should consider compromising with the client. In this situation, compromising a reduced owed amount may end up being the only chance you have to recover any of the owed funds.
Hire Alacrity to Collect Your Old Debts
Alacrity Collections is proud to be a leader in debt collections since 1982. Chasing overdue invoices is not an effective use of your time. Let our team help so you can work on running and growing your company. We achieve great results that are over twice the national average and treat all of our customers with dignity and respect. We work tirelessly to protect your brand and improve your net returns. To learn more about our services and get in touch, please call us at 1-800-752-9663 or email us at firstname.lastname@example.org.