By: Heather Larson
One of my first jobs was working for a manufacturer that made large construction machines. This company couldn’t pay the bills for the parts and labor for the last machine it built until it sold a new one. (We all know that’s no way to run a business.) My position in accounts payable involved fielding calls for the vendors who hadn’t been paid and making up stories about why. I don’t think I fooled anyone.
Employees (those on the inside) can usually see the writing on the wall when a company has money problems: lots of closed-door meetings, layoffs, and stressed-out management. For customers (those on the outside who are doing business with these struggling companies), it’s not always so obvious. If you’re an outsider, be aware of the following signs of a financially troubled company.
- All your phone calls go to voicemail, and nobody returns your calls.
- The vendor asks to delay payments or make partial ones.
- Key executives are leaving the company.
- The vendors pay with non-sufficient fund checks.
- The vendor doesn’t sign checks (my employer did this).
- The vendor claims your invoices are incorrect on more than one occasion.
- The vendor asks for a higher credit limit.
- You hear through word of mouth or via social media that the vendor’s employees are worried about their jobs.
- Quality of the vendor’s service or product declines because it is pruning costs.
You may feel confident that the company will pay its bill—although maybe a little late—but if it shows two or more of these signs, there is cause for concern. To avoid these circumstances at the outset, you should have a process in place that discourages risky businesses, such as running credit checks and getting references when you bring a new account on board.
If a company you’ve been doing business with for a long time exhibits some troubling signs, ask for payment upfront. If you feel they are becoming too much of a risk, refuse to sell to them. It’s harsh, but you need to protect your bottom line.
Heather Larson writes about a variety of business issues from her office in Tacoma, Wash.