1. Late Payments
This is one of the biggest indicators that a business is having cash flow issues. As soon as payments start to come in late it may be that because they are holding those payments waiting for cash to come in to cover what they owe. If late payments continue be sure and communicate with your client as communication with most business issues is often the key to a good outcome.
2. Partial Payments
If only partial payment on an invoice is received, this is also a big indicator that cash flow problems may be occurring. Sometimes a business when they are worried about meeting all their obligations will send only a partial payment instead of the entire payment due. This might be all they have at the moment. When this occurs it should be followed up immediately.
3. Poor Communication or Late Communication
If it’s difficult to get a hold of your client or communicate with them whether its email or the phone it could be a sign that they are having issues with cash flow. If you are constantly chasing down your client either to get them to pay or simply to talk to them they might be having issues paying their bills and therefore having cash flow issues.
4. Bounced or Returned Cheque
This is another huge sign. If a cheque is returned from the bank it must be acted on immediately and you need to have your client cover all bank costs. It’s possible that simply it was a bookkeeping mistake but you shouldn’t presume so and should move quickly to collect on that account. A bounced cheque is bad for everyone involved.
5. Post Date Cheque
If businesses are regularly post dating cheques this is certainly a sign that they are having cash flow issues. While post dating is essentially paying an invoice late some businesses feel that if they go the cheque to you by the invoice date then they have paid on time, even if the cheque can’t be cashed until a later date. This of course is absolutely untrue, the day the cheque can be cashed is the day the invoice is officially paid. A post dated cheque is worthless until the date of issue.
Just because you see one of these from a client isn’t a guarantee that they are having cash flow issues but it certainly is a sign and should be taken seriously. These red flags are good opportunities to follow up with the business and see if you can find out what the real issue is and if there is anything you can do to assure you get paid on time and you keep your client, hopefully for years to come.