Bad Customers

The 4 People Who Don’t Pay Your Bills (And How to Deal With Them)

Debt Collection  |  5 min read

It’s like déjà vu. Once you’ve been in business a while, you notice things repeating.

Certain cycles, similarities and repetitive elements appear. Similar patterns play out time and time again. It’s why experience is so valuable, if you utilize it well.

And when you analyze the situations where debt goes bad, you are likely to recognize it’s seldom completely unique cases, but often eerily similar ones that result in serious debt collection issues. In many ways, it’s as if the same four problem customers come back to haunt you, again and again, wearing different clothes.

You’re not alone. Many entrepreneurs have trouble dealing with a handful of recurring personality types. From my perspective, here are the four (fictional but accurate) customer personas most likely to bestow you with bad debt, and how to manage each one:

1. High Flying Harry
Harry is a business renegade with big dreams. He lives to roll the dice, and is a huge spender when times are good. Trouble is, times never stay that way. When the economy slows down, Harry’s high burn rate causes heavy damage. He lives by the adage of “Pay Yourself First,” so is bound to dig a deep hole, eventually leaving mere crumbs for credit grantors. Once the CRA and banks take their share, there will be nothing left to pay your bills.

What to Do: Use a credit application and run a credit check on all accounts where you can’t afford a default. If there is any reason for concern, insist on a sizable deposit to minimize potential losses. You can also insist on a personal guarantee or being a secured creditor with a Security Agreement (which guys like Harry tend to shun). Pay close attention to your risk tolerance, and don’t compromise your business interests. At the first delay in payment, prepare to send Harry to collections. If there’s money now, it’s going fast.

2. Contesting Constance
Constance a very particular customer. She requires everything to be exactly as described, and has no tolerance for any variability in timing, specifications or quality. She is blatantly proud of her adeptness at contesting supplier bills and having them reduced—often to levels below cost. The moment Constance receives your bill, she begins auditing it for points to dispute, and will often quietly hold out on paying if she finds one or more weaknesses. It’s a stall tactic, and one effective at keeping Constance’s money in her own bank account as long as possible. Arm Constance enough and she’ll dispute your bill in its entirety, and write a scathing online review for good measure!

What to Do: Although it’s always important to have good documentation, people like Constance will make you glad to have gone the extra mile. These people often used this approach with their businesses to delay, reduce, or avoid payment obligations. Have a good contract and highly detailed specifications, especially if you are in the construction industry, where disputes and claims happen all the time. Follow up your invoices on the due date and address any real issues promptly. You may want to identify reasonable deficiencies and agree to a small (commonly 10 or 15%) holdback until they are resolved. If you send Constance to collections, be sure to arm your agency with comprehensive documentation.

3. Best Intentions Barbara
Barbara wants desperately to operate by the book and succeed, but is in a vulnerable spot. She runs a small service business within a volatile sector, where a change in commodity prices can put a chokehold on her revenue. Barbara appreciates your service, likes your product and says she wants to pay. But she’s short of money right now. Word on the street is that her business is in real danger.

What to Do: Be aware of customers who operate in high-risk sectors, and proactively monitor market impacts on those sectors. If there is a chance the customer can pay you, help them do so. If Barbara really did intend to pay as agreed, that’s half the battle. Set up a payment plan you can both live with, and eat away at that balance due. With every payment date, you are also resetting your province’s statute of limitations on debt. If Barbara says she can’t pay a reasonable amount at all, she ought not have incurred the debt and it’s time to involve your collection agency. Not only will it remove those painful and draining follow-up calls, but the power of third-party psychology can work wonders in giving an obligation top priority, even in tough times.

Third-party psychology can work wonders in giving a debt obligation top priority, even in tough times.

4. Scheming Stan
Stan is perhaps the most difficult of all the debtors you’ll encounter, because he really has no intention of paying unless forced to. He is a bit of a business sociopath, and sees avoiding payment as a business victory: “win-win” means he stiffs you twice. Stan will often refuse to pay with no significant reason (another Donald Trump hallmark), and may even strategically design his businesses to protect him from creditors — something at which former Edmonton Oilers owner Peter Pocklington became notoriously adept. Stan has tons of money, much of it stashed safely offshore. If he expects to need your product or services again, you might eventually get paid, and regardless you’re in for a frustrating ride.

What to Do: Stan thinks himself infinitely more deserving of his money than anyone else, so it is important to make your invoice a top payment priority especially if you’re a small fish. If your billing is a mess, he’ll never pay, so have everything buttoned up and documented. Make your terms clear, and send the account to a credit reporting collection agency quickly when the inevitable happens. In this regard (among others), MetCredit is unique in that it reports commercial debt to specialized regional credit bureaus as well as the big national ones. Stan knows the importance of his company’s credit score and is likely to pay up when future financing is at risk, as long as you’re clearly positioned to defeat his lawyers if challenged in court. You definitely need expert negotiators on your side to deal with the likes of Stan.

Debt collection is hard, but remember that you’re never alone. Call an expert at 1-888-797-7727 or submit our quick form, and we will respond promptly with answers to even the toughest questions. Or for more self-help, download my free 10 Pro Tips with the link below and start collecting smarter!

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Brian Summerflet Author: Brian Summerfelt

President and CEO of MetCredit, Canada's top-performing consumer and commercial collection agency

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