How to minimize the risk of contracting with bad payers
To minimize the risk of contracting with bad payers is something that each business owner will want to figure out how to do. Prevention is always better than cure! So take a look at your processes and fix those before attempting to cure an already existing problem.
1. Homework, checks, balances, google, phone
Most sales representatives are probably out in the field the entire day attempting to list new clients and spend very little time at the office doing the groundwork for these meetings. These employees need to be specially trained in order to best protect your company.
One of the most basic manners of ensuring that you do not contract with a bad payer, is doing a routine credit bureau check. This check will tell you immediately whether the company you are selling your product to is actually trading. This may seem trivial, but many companies are trading while they have been deregistered at the CIPC and are not allowed to trade and cannot be sued.
2. The Golden Rule – VETTING
Your vetting process should take place once your sales representative has received the requisite paperwork from the potential client, but before he or she signs it on behalf of your company. The vetting process should be extremely thorough and should be able to tell you whether you have a good or bad client in the pipeline.
As you have already established that your potential client is trading, in step one, you can now explore in-depth by establishing your client’s payment history by means of a credit bureau search.
However, consent should be obtained to do these checks. Make sure that an attorney has drafted your standard agreement and that this agreement makes provision for credit checks to be done.
Reading reviews on your potential client is also very handy during the vetting process.
3. Service & initiatives
Who is selling your product? Exceptional care should be taken when employing sales representatives. Absolute honesty and sound character is paramount.
Not only is your sales representative in a position to cost you money if things are not done 100% correctly, but they are in a position to defraud the company and eventually cost the company both revenue and severely harm its reputation.
When your sales representative’s only incentive is commission due to a small salary, you are opening your company up to possible fraud. It may be wise to rather offer a slightly higher salary and lower commission percentage to ensure that your sales representative’s bread and butter is not dependent on commissions.
4.List bad payers on the Credit Bureaus
If a client is a bad payer, but not in a position where the company faces possible closure, a very handy tool is to list their payment habits on the credit bureaus. Again, make sure that your agreement is drafted well and makes provision for listing of bad payers.
Furthermore, take added care in training the staff members responsible for the actual listing to ensure that all requirements are met and adhered to. Non-compliance with the relevant laws in this regard will harm your company far more than the harm done to your bad paying clients.