Payment within 30 (thirty) days from date of invoice has become as scarce as the rain in Cape Town. It has become increasing difficult for debtors to pay timeously and regularly. Whilst some debtors are quick to communicate their challenges and opt for restructuring or extensions, others choose to stick their heads into a hole and hope to go unnoticed.

Cash flow is the life blood of any business. Recoveries should be prompt and a creditor should have the means and knowledge to identify potential difficult debtors in order to recover monies that are due and payable efficiently. Some debtors are inherently slow payers. They fall into the category of “eventual payers”, however, you should be wary of debtors who are about to cross the Rubicon and become non-payers. Here are some signs which may indicate that a debtor has no intention of making payment (or rather, no intention of making imminent payment): –

 

UNANSWERED CALLS & EMAILS

Whilst this might sound obvious it is something you should keep a look out for. Many debtors ignore calls and emails to buy time. If this has become a pattern it is vital that you secure a direct communication with someone in authority to give you regular updates on their efforts to make payment. Ensure that you record any change in telephone numbers and contact persons to keep the pressure on.

 

UNWILLINGNESS TO ACKNOWLEDGE LIABILITY OR REFUSAL TO SIGN AN ACKNOWLEDGEMENT OF DEBT

Whilst a debtor might acknowledge their liability over a telephone conversation they might refuse to record this acknowledgement in writing. An admission of liability in writing would be a great advantage if a debtor is handed over for legal recoveries.

 

“WE ARE IN THE PROCESS OF LIQUIDATION ” or “WE HAVE BEEN PLACED UNDER LIQUIDATION”

Usually the word “liquidation” means that a creditor should consider a write-off or to throw in the towel. Be careful of debtors who selectively use this word but who have no intention of being liquidated. Ensure that you are kept in the loop of any liquidation process and that all communications are in writing. Court orders and formal court documents are an absolute. Keep your own records and take legal advice should you wish to claim from an insolvent estate.

 

CHANGE OF NUMBERS OR ADDRESS COUPLED WITH COMPLETE LACK OF COMMUNICATION

It is important to regularly visit debtors. This will give you direct insight into the day to day trade of a debtor and their liquidity. Communication is vital for effective credit management. If a debtor has stopped communication it is imperative that you regain contact and assess the debtor’s ability to make payment. A visit may prompt payment on its own but can also give you the opportunity to make your own assessment of a debtor’s credit worthiness.

 

A DEBTOR WHO NEVER MEETS DEADLINES COUPLED WITH REDUNDANT REQUESTS  FOR INVOICES

A debtor’s inability to keep to deadlines might be worrying. Keep the pressure on and warn the debtor of possible legal action. A common trait amongst these debtors would be to request for invoices and statements every time you call for payment. This creates a false impression that they are dealing with the debt and would be making a payment shortly.

 

POST-DATED CHEQUES WHICH HAVE BOUNCED OR MISLEADING INFORMATION

Lastly, the use of cheques have become somewhat obsolete and the tender of post-dated cheques should be accepted with caution. This can be another attempt at delaying payment and to buy time. Be wary of misleading information regarding the “prospects of big new business” or “signing up big contracts”. You should always request documentary proof and warn of your right of cession of book debt if such right has been incorporated in your credit agreement.

In conclusion, this list does not intend to be exhaustive but might be useful to uncover the runaway debtor. Keeping the communication lines clear and open is always best when dealing with a troublesome debtor and sometimes restructuring the debt or providing reasonable extensions may assist in recovering payment. In some cases, legal recovery might be the only option to prompt payment.

DISCLAIMER:
This article is made available for educational purposes only, as well as to give you general information and a general understanding of the law, not to provide legal advice. You should not act upon this information without seeking advice from an attorney relating to the specific circumstances on your matter and as such you rely on this article at your own risk. This article may age and may not reflect the most current legal developments, legislation and judgments. The material may be changed, improved, or updated without notice. Bentley Attorneys nor Bentley Credit Control are not responsible for any errors or omissions in the content under any circumstances.