This is a series of Q & A interviews with Nicki Kinton of NK Credit Consultancy in which PPD is looking at the typical excuses that suppliers often hear when chasing late payments, and asking Nicki how best to handle them.

 

Excuse #1: Accounts are too busy

 

How often do you hear this excuse when managing credit control on behalf of your clients?

It’s quite a common response from smaller businesses when the person responsible for paying the bills wears more than one hat in the business. There isn’t an accounts team, just a person who does the accounts and they are probably focused on one of their other responsibilities at the time you call if you get this response.

 

You may also find that in some larger organisations the accounts payable team don’t take calls at certain times of day because the staff are focused on a particular task, such as query management or the payment run.

Unfortunately, though, sometimes it’s just an avoidance technique.

 

Is it a legitimate excuse? (It doesn’t seem so)

It’s easy to feel that you’re being fobbed off and that it’s not a legitimate excuse, but there will be instances, consider the scenarios mentioned above, when they really can’t talk to you at that time. You need to ask questions to see if it’s really true but remember never outright accuse a customer of being a liar!

 

What should suppliers do to ensure that accounts departments are not “too busy” to pay their bills?

It’s not up to you to make sure they’re not “too busy” to pay their bill. That’s up to your client’s management.

What you can do is check if this is a one-off situation or a regular ‘we’re not taking calls’ time and establish when would be the best time to call.

Get a specific contact name, a direct dial number and email address. Whilst we shouldn’t rely on electronic communications for collections activity it’s sometimes a useful way to get attention.

Consider the first scenario above. If the person who does the accounts is also the owner manager of the business they may well prefer email as they can deal with it outside of normal working hours.

Try calling on different days and at different times. Don’t forget to keep a record to keep track of the days and times so you don’t waste your time repeating the same ones. If you get the same excuse no matter when you try that’s a fairly good indication the customer is either stalling you or is incredibly disorganised!

Escalate! If the accounts team are not taking your calls, escalate to the FD or other Exec. Ask whoever you are speaking to or Use your sales teams’ relationship with the buyer to get information on the customers hierarchy. Again, get names, direct dial phone numbers and email addresses. Sometimes just asking for this information will be enough to “un-busy” the right person.

If they won’t give you the information you could try looking it up on their website. If it’s not there call reception and leave a message for the FD/CEO. You may not get the call back from the FD or CEO you tried to call but they may go and ask their accounts team why they are being hassled about an invoice!

In the end persistence is key. Regular and frequent. Just trying to call once a week will not be enough.

 

NK Credit Consultancy Ltd offers a complete credit management solution for your business covering all the core competencies including due diligence / designing credit policies / designing terms of business / improving the accounts receivable process / ensuring compliance with consumer credit regulation and Credit Insurance Policy / establishing reasonable credit limits and payment terms and more. To contact Nicki click here.

Recently we’ve had a spate of ratings on The Prompt Payment Directory with explanations to the effect that the customer couldn’t afford to pay the invoice.

There could be various reasons why a customer might not have been able to afford the invoice but armed with this insight from The Prompt Payment Directory all potential suppliers should of course be very wary about doing business with a company in this position. However, that doesn’t mean a business relationship should be ruled out altogether.

For any supplier armed with this information about a company they are proposing to do business with we’d recommend asking for at least 50% of the payment in advance and if possible all of it. In some verticals it’s not unusual when doing business with a customer for the first time to make such a request.

Also, go through the usual channels to check the company credit rating, and if need be ask the potential customer directly whether they know of any foreseeable impediments that may prevent them from paying their invoices…. see what they come back with, if it’s nothing then they may be hiding something.

It would also be worth taking a look at the most recent set of accounts, a basic version of which will be available on the Companies House register.

The outcome of of these discussions and investigations should help shape the final contract.

The Prompt Payment Directory’s scoring system aggregates data across various criteria including business relationship and the desire to continue working with a customer. Just because customer’s pay late it doesn’t always mean they have been difficult or unpleasant to work with.

If an invoice can’t be paid it could be due to an unusual occurrence that caused a temporary cashflow problem beyond the customer’s control.

If you see a PPD star rating of between, say, two and four for a company on our directory, it’s worth checking the detail of the rating on the company details page.