Wolf in sheep’s clothing

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In more than a decade of studying debtor behavior, I have come across a few serial or habitual debtors. The following is a list of behaviours and statements that seem to be common indicators of likely problems.

Contact and request outside of normal bounds

Especially in the trades, I hear all the time of the clients that “need help right now”, who call out of hours and ask for services that aren’t normally supplied.

And they tend to be the ones that end up causing all the trouble when it comes time to pay. That initial behaviour is telling of a reactive, not a proactive attitude. And it usually translates into only paying once pressure is applied.

“If you look after me this time, there will be a lot more work coming your way.”

This statement is seldom true. It speaks to a feeling of self-importance and an expectation of special treatment, which is not a great way to start a financial relationship.

Post-transaction negotiation.

This behaviour is more prevalent within certain cultures, but is definitely a warning sign.

The time to negotiate is before the transaction, not afterwards, when the supplier is at a distinct disadvantage. Provide a written quote with terms of trade and stick to the price.

I always say to my clients: “if you don’t believe that your service is worth what you charge, then charge less. If you do, then stick to your guns and don’t discount.”

Private individuals asking for a seven day or 20th of following invoice, on the first transaction.

In my experience this is a big warning sign – it is a fishing expedition to see how lenient the credit terms really are, and seldom ends well.

If asked for this, tell the potential client that there is a process in beginning an account and that a full credit application will need to be filled in. Those just fishing around will normally drop out.

Potential client stating how good they are at paying bills, or how wealthy they are.

This often highlights ingrained insecurities surrounding money, and may be a very good indicator of payment habits that are just the opposite.

Constant name-dropping of well-known individuals or company directors (if you are from a large company).

As with the above, this is often a good sign of insecurity, and is completely irrelevant if they are applying for credit. It is often used to try and build a sense of importance and circumvent the normal application process.

Below are some other comments that should send up warning signals, and my suggested responses.

I don’t have my wallet with me, but let the car go and I will pay by internet tonight. NO. Go get your wallet or use our computer to transfer funds.

– Can you make the invoice out to X…. as they are going to be paying the bill? NO. But after payment, we can change the name on the receipt to the party who paid.

Do you credit check accounts here? YES – we do and goodbye.

No, I don’t have any ID on me. Then that’s how much credit you will be given.

I didn’t get the invoice. But the quote got there OK?

– I have been using your competitor for years, but want a change: Overdue account, eh?

I paid it into the wrong account. That’s strange, our account number hasn’t changed in years.

– I’m not happy with the work. But you only realised this after the invoice was issued?

At the end of the day there will always be professional debtors who will try and have a go, but if you establish good Terms of Trade, do Comprehensive credit checks (EQUIFAX), and employ some simple debtor profiling techniques, you can severely reduce the impact that these individuals can have on your business.

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Nick Kerr
Nick Kerr
Nick Kerr is the director of IPI Group Limited. He can be reached on 021 876 527 and nick@nzipi.com.

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