For everyone else, here are ten of the best signposts and starting points to help you flag up high-risk companies, and avoid allowing them to run up a toxic debt.
1. Management changes
It takes a steady hand to run a stable company, and changes of management or directorship are an indication of trouble at the top - which could lead to everything from a lax approach to accounting, to the collapse of the whole company.
2. Change of address
Companies often change offices, but if the registered head office has changed recently, or changes often, it could be a warning sign that the organisation is trying to sever its links with its old trading address, possibly for reasons that are more than a little dodgy, or are simply relocation to cut their overheads in a time of poor cash flow.
3. Unanswered calls
Many people find phone calls an unwelcome interruption to their day, but if you're a creditor and you're having trouble getting through, you should treat this as a red flag.
4. Bouncing email
Emails that are ignored, receive a generic automatic reply, or come back with an 'inbox full' or 'address does not exist' error are all red flags too - if you're having problems making contact now, what if you need to chase for payment later?
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5. Habitual lateness
Consistently late payment can be a sign of poor admin processes, or of cash flow problems; you'll probably never know for certain, but you can rest assured that, in most cases, those who pay late now will always pay late in the future.
6. Broken promises
You might be prepared to forgive payments that consistently arrive a few days late, but you shouldn't forgive a company director or accounts department that simply lies to you. "The cheque's in the post" and "the money should be in your account shortly" don't buy much time as delaying tactics, and you shouldn't give any extra time to anyone who treats you like an idiot.
7. Reissued invoices
Never, ever, reissue an invoice to a third party - debtors will come up with all kinds of reasons why you should do this, e.g. "it's a holding company for finance purposes" and so on, but all it really does is to risk transferring legal responsibility for the debt away from your original client.
8. Bouncing cheques
If you receive payment by cheque and it bounces, or the cheque is stopped, it's a clear klaxon of a toxic cash flow scenario. Act fast to have payment reissued, either by direct bank transfer or some other instant method, as you never know how soon the debtor might declare insolvency if things are that bad.
9. County Court Judgments
Of course a CCJ is a bad sign, but if you are already trading with a customer when they have a judgment made against them, it's probably a good time to call in your debts with a considerable sense of urgency.
10. All of the above
OK, you're unlikely to find an unresponsive company that's recently changed address and management, with a CCJ against it, that wants to pay you using a stopped cheque - and it doesn't take a rocket scientist to recognise that if you do encounter a client like that, you probably shouldn't supply them.
But even two or three of the above - a habitual late-payer that doesn't answer the phone, for instance - can quickly stack up to a very high bad debt risk.
If you spot several of the warning signs from the same client, call in your debts and cut off supply, or ask for payment upfront on future orders, and you can hopefully avoid having to launch debt recovery proceedings against a firm on the brink of insolvency in the not-too-distant future.