It doesn’t take too many nonpaying customers to create an expensive problem.
In fact, far too often today, aggregate producers must be concerned not only with their own crushed stone or sand and gravel operations, but also with the financial situation of customers and suppliers.
There are always customers that go out of business without warning – or without paying their bills. While it is often too late to collect anything when they do, business owners who are vigilant about outstanding accounts receivable and the financial status of all customers can minimize the uncollectible amount.
Best of all, dealing with troubled customers often eliminates the need for that dreaded final step of “firing” them.
Recognizing troubled customers
It’s far easier to take a proactive approach by avoiding the types of customers that usually spell trouble.
Staying alert to signs that longtime customers may be having financial problems and, most importantly, taking quick action when their payments are slowing is important.
Although a credit check is important, it’s not failsafe. Because things can go south quickly, minimizing exposure to a customer or potential customer’s credit troubles requires every aggregate producer to exercise “due diligence.”
In other words, minimizing the operation’s exposure to the financial and credit troubles of others – at every step of the relationship – is important.
Due diligence also means staying on top of paperwork. It is all too easy to fall behind on invoicing in the midst of big projects, but letting it slide for a month or two will put any business at risk.
To avoid this problem, establish regular routines for billing customers – ones that reflect their preferences might be a good strategy. If customers start taking longer than usual to pay, it becomes readily noticeable.
Staying alert for signs that customers’ financial situations are changing can protect any business. In fact, before acting against a troubled customer, aggregate producers should seek information from every source possible to determine where the troubled business is headed and how others have resolved their unpaid bills.
Finders keepers
Remember the old saw about possession being nine-tenths of the law?
Possession of the funds collected from a troubled customer may not be forever, but it does give a business negotiating leverage in a lawsuit or bankruptcy when trying to avoid paybacks.
Don’t hesitate to accept payment on account because of the possibility that the payment may be refundable as a “preference” if the customer files for bankruptcy. It is not wrong to accept money genuinely owed to the business – and neither is it wrong for the soon-to-be-debtor to pay it. It simply may be recoverable by a bankruptcy trustee.
Even creditors have options
When customers fail to pay their debts, the aggregate producer as the “creditor” has several remedies available to help collect the funds due.
In addition to common collection strategies such as dunning notices, collection agencies and even small claim courts, bankruptcy is an option.
