Cash Flow Risk Management Small Business
3 mins read

5 signs of an unreliable client

With any business relationship, performance is only ever as strong as the trust you hold in one another. And as your relationship progresses with a client where trust is lacking, it’s harder to cut ties and accept your losses.

It’s critical then to decide whether a prospective client is the right fit for you and your business at the outset, before any key investments are made into the relationship. There are a few telltale signs of unreliable prospects, as well as existing clients, that you can look for to guide decisions, explained below.

1. Bad credit rating

Credit checks are an essential step for going into business with a new customer or client. They outline details of a registered business or company, including their credit rating – making them an easy and affordable tool for preventing or evaluating unreliable clients.

A bad credit rating reflects a history of poor cash management. According to ASIC, poor cash management is a contributing factor in over 40% of small business failures – so it’s important to ensure your clients and customers will have the ability to pay their invoices.

A bad credit rating is not necessarily a reason to walk away from a business deal, but it may impact your client’s ability to pay their bills or indicate previous bad client relationships, so it’s important you have the full picture.

2. Any mercantile enquiries

As part of the credit check, your debt agent should search for previous mercantile enquiries on businesses your partner has been previously involved with. A mercantile enquiry is a mark left on a business’s credit record that implies it has either been late to pay, or failed to pay, debts in the past. These indicators could suggest a problem with cash flow or wider business management.

3. Unable to accept responsibility

An inability to accept responsibility for one’s actions can be hugely problematic in a client or customer. It sets the stage for arguments, blame games and a tendency to question invoices.

Being unable to accept responsibility for actions might merely indicate a poor work ethic, or at the more extreme end of the spectrum, a personality disorder. In either case, it’s important that the source of the problem is identified and steps taken to mitigate it – before irresponsible clients mean you don’t get paid.

For prospective customers, an inability to accept responsibility will come through during their discussion of previous business failures. Prospects that point the finger at previous partners, customers and stakeholders, but show no signs of their own mistakes and learnings, should immediately ring alarm bells.

4. Uncooperative

If your client or customer is not pulling their weight, by giving you incomplete information or paying bills late, deadlines can be hard to meet and work can be compromised. Usually this one can be remedied with a frank conversation.

5. Poor communication

Communication is key, and having open lines of communication with a client is an absolutely essential aspect of any functional business relationship.

If your customer or client is not being upfront, is taking a long time to respond, or is lying to you, it’s time for another frank conversation. These conversations are often difficult, but there are plenty of techniques – such as these by Flying Solo – which can be helpful.

So there you have it. If you believe your client or customer is unreliable for any reason, it’s time to sit down and have a conversation with them about it. The best solution – and prevention strategy – when dealing with unreliable clients and customers is clear and honest communication.

About the author

Brendan Towers is the Director of Professional Collection Services

Contributor to the CreditorWatch News Hub
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