A customer who doesn't pay is at best a charity, and at worst a parasite. And it's way better to know the difference before you supply your products and services than to have to chase after them later on.
So look out for these red flags and be prepared to walk away from such people. You will save yourself a lot of headaches, and it's better to focus your attention on those prospects who are prepared to pay.
Here are the most common ones I have come across:
1. They don't sign your quotation or issue a Purchase Order
Before you supply any product or service, you must either have a signed quotation, or a Purchase Order, or both. Period. No exceptions.
A customer who does not sign your quotation by saying "it will be alright" or "we've known each other so long" is almost certainly a charlatan.
If you've really known each other for a long time then they won't mind signing the quotation or issuing a Purchase Order.
If they threaten to buy from someone else, let them.
Then it's your competition who will have the disadvantage of dealing with them.
You don't need customers who make excuses. Focus your time and energy on people who will have absolutely no problem in signing a quotation.
2. They don't acknowledge your emails in which you mention price information
Emails serve as contracts, and provide evidence in case you take customers who don't pay to court.
Charlatans know this, and therefore don't reply to your emails in which you mention your prices so they can claim later not to have received or seen it.
Instead, they will start a new email thread.
Now, there's no guarantee that a customer who replies to emails containing pricing information will pay on time. But it's one more piece of evidence that they have committed themselves to paying that you can produce in court if they don't.
3. They claim someone else will pay
Depending on your product or service, your customer might claim that payment will come from someone else.
Now, this might well be true. But you should check that that other person actually exists, and has consented to paying you.
For this reason some suppliers will add a clause in their contracts in which the person signing warrants that they are authorised to enter into this contract with you.
A charlatan will shirk responsibility for paying. If they refer you to someone else for payment, ask to be introduced to that other person.
If they refuse to, red flags should immediately go up.
4. They avoid conversations about payment terms
The common thread you will find in all of our columns is that communicating with your customer about payment terms before you enter into a business relationship is always better than chasing after payment after you have delivered your products or services.
Charlatans will not want to have such conversations. They will shy away from sharing their payment terms, or even get aggressive and threaten not to buy from you if you pursue this discussion.
Let them go. Walk away. No matter how tough business is, they are not worth your time.
I know you're hungry for business. You might think they are a hot prospect, and that to ensure they don't go cold you need to bend to their way of doing things.
But I have never seen a serious prospect walk away just because you ask for a signed quotation or a Purchase Order, or wish to discuss payment terms.
Look out for the above red flags. They could save you from a costly mistake.