A Check List For Analysing Your Clients Financial Situation
For all organisations it is vital that positive cash flow is maintained
, this means ensuring prompt payment of all sales invoices. If a customer is unable to pay there are usually small, hidden signs. Whilst sales staff are often keen to continue selling to their existing customers, their sales training should include information about the warning signs to look out for. If you can recognise these signs in good time, you may be able to save something before the signs indicate a real storm.The following check list describes in three stages the criteria you could use to analyse your client's financial situation in order to anticipate potential losses. The more criteria the client fulfils, especially in the second stage, the more precarious the situation is.
The letterhead
The client has changed the legal form. Ask the client what prompted them to do this.
The client has changed bank. Get your bank to find out information about your client from their old and new bank.
The client has opened a second bank account. Find out more information about this too.
The client has changed the location of the company headquarters. Get a credit enquiry agency to find out the reason for this move.
The orders
A regular client seldom contacts you and then only orders small amounts. If the reason for this change in order behaviour is a lack of liquidity (which should be checked out by the field sales department), insist on additional security measures or on pre-payment before you deliver.
Be on your guard particularly if the client changes the method of payment.
The client suddenly places an order for a large amount. Whilst the sales person may initially be delighted with this, be careful - it may be that your competitors have refused delivery or the client wants to stock up completely just one more time. Make sure your sales training highlights this behaviour as one of potential concern to the company.
The client suddenly starts lodging random complaints. Stop all deliveries immediately. The client is trying to gain more time by lodging unjustified complaints.
The client is selling off the goods you deliver at cheap prices. This is a sign that the client needs to generate turnover at any price. On no account increase supplier credit.
The client has an unusually high staff turnover. Even short-term contracts and a recruitment freeze should prompt you to stop your sales department and make enquiries.
The method of payment
The client suddenly starts paying by bill of exchange rather than by cheque. The client needs an extension of credit. It is best to let a credit enquiry agency investigate.
The client suddenly exceeds the period allowed for payment, forfeits cash discounts and even asks for a deferment of payment. A talk with the client is now due.
The client wants to pay in installments and promises to place larger orders. Only deliver on the condition of pre-payment.
The client offers to concede some demands as a security. Do not accept this. You are not in a position to check whether these conditions even exist or have indeed been conceded elsewhere along the line.
The client's cheques start bouncing, bills of exchange are protested or warning notifications are issued. Collection is one by a third party. Alarm bells are ringing. This is the longest you can leave it to stop all deliveries. Under the right to reserve property, recover the delivered goods as quickly as possible.
Selling profitable is the main focus of many sales training courses, where emphasis is placed on obtaining the right price in negotiations. However, even the best price negotiated will be worthless if the client does not or can not pay on time.
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