Identify potential cashflow problems

If you only have a few customers, and one of them has money problems and can't pay what they owe you, it can have a serious impact on your business. It is good practice to avoid relying on a small number of customers if possible, but it is also important to be vigilant and look out for signs that any of your existing or potential customers are in financial trouble.

There are several signs that a customer may be struggling financially - for example:

• a change for the worse in payment patterns
• frequent mistakes on cheques - these could be an indication that they are avoiding paying or buying time
• they are refusing to talk to you or are putting off payment for little or no reason
• smaller or less frequent orders than usual
• they unexpectedly or suddenly request an extension to their credit limit
• if your customer is another business, you or your sales staff may see problem signs when visiting their premises - eg unsold stock

If you supply to a business and are concerned that they may be in difficulties, you could consider:

• Using a credit agency - they will provide you with access to databases with up-to-date financial information about businesses. You can find your customers' credit-worthiness with Equifax or Experian.
• Accessing their accounts - if your customer is a limited company - on Companies House.

You should also speak to your customers. If they are struggling financially, you may be able to help them by renegotiating their payment terms. This may delay your income, but it could also retain the customer in the future by supporting them during a difficult period.