Taking the decision to stop supplying a client can be one of the hardest decisions any company has to take. With every piece of business so hard won it can be difficult to take a firm line with your credit control and potentially prejudice further income.
But when a customer persistently refuses to pay in full and on time, sometimes you are left with little option but to act.
Your payment terms exist for a reason, and keeping a client on who does not meet their obligations can actually cause more damage in the long run, taking up your valuable time with needless chasing when the money should already be in your account.
Looking at it logically, if someone does not pay, you are not losing any real income anyway. So stopping the supply of goods or services is better for your business as it stops you wasting valuable time and resources on unprofitable clients.
Read our blog 5 Red Flag Signs That A Client Won’t Pay.
Setting Up A Stop List
When all other avenues for encouraging payment according to your terms have been exhausted, and you are sure that this is a long term issue, it is time to set up a stop list.
A stop list is effectively a blacklist of clients who are no longer to be supplied in lieu of missed, late or incomplete payments. It is crucial that a stop list is shared effectively with everyone in the organisation, so everyone knows who is on the list and to ensure they don’t provide any further goods or services whilst payment remains outstanding.
It is important to decide the terms of your stop list, and again share them with all members of staff. The most common use is to record a list of customers who are overdue on payment and whose access to new goods or services is restricted, until such time as all outstanding payments have been made in full.
Managing A Stop List
It is important to make sure information on a stop list is kept up to date - you don’t want to penalise customers who have mended their ways any more than you want to keep supplying a serial defaulter.
It is also important to make sure you inform your customers when they are being “put on a stop”. Transparency will help to maintain your professional reputation, and avoid disputes further down the line. It also means they understand exactly why they are being refused credit terms, and exactly what the terms are they have to meet to get back on the straight and narrow. This can give many late payers the incentive they need to mend their ways.
Once you set up a stop list, stick to it. Bad debtors who learn you are a soft touch even after taking an apparently tough stance will just keep trying their luck. Remember the purpose of a stop list is ultimately to protect your cash flow, and therefore your business, from the risks posed by continuing to supply work to customers who have delayed or missed payment deadlines.
If all else fails and your customer still doesn’t pay what they owe, then at least you have limited your potential exposure to an even bigger bad debt by ceasing to supply your goods or services at the first sign of financial trouble. Remember, a customer pays. A good customer pays in full and on time, every time.
Over 150 Years Of Industry Experience
Our modest but highly skilled team has a combined total of over 150 years of experience in commercial credit management and B2B debt collection. From independent IT contractors to major film and TV publishers, Safe Collections has the knowledge and experience you need to get paid quickly and cost effectively.
Image Stop Sign by thecrazyfilmgirl is licensed under CC BY 2.0